Cocoa Futures Advance on Supply Concerns as Ivory Coast Port Flows Decline

Cocoa futures posted significant gains today as concerns over global supply tightness outweighed demand headwinds. March ICE NY cocoa (CCH26) climbed +295 points to reach +4.96% higher, while March ICE London cocoa (CAH26) surged +275 points for a +6.52% gain, hitting two-week highs in the process.

Port Activity Signals Supply Pressure

A substantial slowdown in cocoa deliveries to Ivory Coast ports has emerged as the primary catalyst for price strength. During the week ending December 28, farmers delivered just 59,708 MT of cocoa to ports—a sharp -27% decline compared to the equivalent week in the prior year. This deceleration extends to year-to-date figures, with cumulative shipments through the new marketing period (October 1 through December 28) totaling 1.029 MMT, representing a -2.0% contraction versus the 1.050 MMT shipped in the same timeframe a year earlier. As the world’s dominant cocoa producer, developments in the Ivory Coast carry outsized influence on global pricing dynamics.

Inventory Drawdown Reinforces Supply Story

Storage concerns are amplifying the supply narrative. ICE-monitored cocoa inventory positions held in US ports declined to a 9.5-month low, with holdings reaching just 1,626,105 bags as of last Friday. This inventory compression supports the broader thesis that global cocoa availability is becoming increasingly strained, providing underlying price support amid varied market conditions.

Index Inclusion and Institutional Buying Provide Tailwinds

Cocoa futures have benefited from anticipated index-related buying flows. The inclusion of cocoa futures in the Bloomberg Commodity Index (BCOM) beginning in January is expected to attract substantial capital into the market. Citigroup estimates that this BCOM addition could trigger as much as $2 billion in buying interest for NY cocoa futures, providing a structural bid beneath prices.

Global Production and Surplus Estimates Tighten

The International Cocoa Organization (ICCO) has significantly revised its outlook for global cocoa balances. On November 28, ICCO slashed its 2024/25 global cocoa surplus estimate to just 49,000 MT from a previous projection of 142,000 MT, and concurrently lowered its production forecast to 4.69 MMT from 4.84 MMT. Meanwhile, Rabobank cut its 2025/26 global surplus projection to 250,000 MT from a November estimate of 328,000 MT. These downward revisions underscore growing recognition that cocoa supply conditions are tightening rather than easing.

Demand Weakness Provides Headwind

Despite supply-side strength, demand indicators remain sluggish across major consuming regions. The Cocoa Association of Asia reported that Q3 cocoa grindings fell -17% year-over-year to 183,413 MT—the smallest volume for a third quarter in nine years. Similarly, the European Cocoa Association disclosed that Q3 European cocoa grindings declined -4.8% year-over-year to 337,353 MT, marking the lowest third-quarter processing level in a decade. North American grindings rose +3.2% year-over-year to 112,784 MT during Q3, though this gain is partially attributable to the addition of new reporting entities that skewed the comparison.

Weather Support and Production Outlook

West African weather conditions have provided some relief to production prospects. Farmers in the Ivory Coast report that timely rainfall combined with adequate sunshine is supporting cocoa tree blooming cycles, while farmers in Ghana note regular precipitation benefiting tree and pod development ahead of the harmattan season. Chocolate manufacturer Mondelez reported that the latest West African pod count stands 7% above the five-year average and “materially higher” than the prior year’s crop, suggesting solid production potential for the forthcoming harvest.

Regional Production Adjustments Shape Supply Picture

Nigeria, the world’s fifth-largest cocoa producer, faces downward production revisions. The Nigerian Cocoa Association projects that 2025/26 cocoa output will decline -11% year-over-year to 305,000 MT, compared to a projected 305,000 MT for the current 2024/25 crop year. September cocoa exports from Nigeria remained flat year-over-year at 14,511 MT, indicating stable but unspectacular shipment momentum from the region.

Policy Backdrop: EU Deforestation Regulation Delayed

The European Parliament’s November 26 approval of a one-year extension to the EU Deforestation Regulation (EUDR) implementation timeline provides temporary relief to cocoa supply dynamics. The delayed enforcement allows EU countries to continue importing agricultural products from African, Indonesian, and South American regions where deforestation pressures exist, effectively keeping cocoa supplies more ample than a stricter regulatory regime would permit. However, this regulatory reprieve appears insufficient to offset supply tightness driven by port flow reductions and production challenges.

Historical Context: Surplus Returns After Record Deficit

Today’s supply concerns contrast sharply with recent history. ICCO’s May 30 revision revealed that 2023/24 resulted in a global cocoa deficit of -494,000 MT—the largest deficit in over 60 years—driven by a -12.9% year-over-year production collapse to 4.368 MMT. The projected 2024/25 surplus of 49,000 MT marks a recovery to positive balances, the first in four years, with global production rebounding +7.4% year-over-year to 4.69 MMT. Yet this recovery now appears modest relative to supply pressures, supporting current price firmness.