West African Weather Boost Weighs on Cocoa Market Sentiment

Cocoa futures have experienced a sharp decline today, with March ICE NY cocoa down 178 points (-2.93%) and March ICE London cocoa declining 129 points (-2.95%), reaching 1-week lows. The primary driver behind this selloff is improving growing conditions across West Africa, which promise to enhance the upcoming harvest.

Harvest Outlook Brightens Amid Favorable Conditions

Tropical General Investments Group highlighted today that West Africa is experiencing ideal weather patterns. These conditions are anticipated to significantly boost cocoa yields during the February-March harvest period in major producing nations, particularly Ivory Coast and Ghana. Farmers are reporting notably larger and healthier cocoa pods relative to the previous year, signaling potential production gains.

Mondelez, a leading global chocolate manufacturer, corroborated this optimistic assessment, noting that current cocoa pod counts in West Africa are tracking 7% above the five-year average and substantially exceed last year’s quantities. With the Ivory Coast—the world’s top cocoa producer—having commenced its main crop harvest, farmers display confidence regarding quality levels.

Supply Dynamics Present Mixed Signals

The supply picture reveals complexity that weighs on market direction. Port arrivals in the Ivory Coast have slowed considerably, creating supply tightness concerns. During the week ending December 28, farmers delivered 59,708 MT to ports, representing a 27% decline year-over-year. Cumulative marketing year figures (October 1 through December 28) show shipments of 1.029 MMT, down 2.0% from the prior year’s 1.050 MMT.

This supply constraint has already influenced sentiment: cocoa prices surged to 2-week highs on Monday before today’s reversal, as the market weighed port delivery concerns against weather optimism.

Structural Support from Index Inclusion

Cocoa has garnered underlying price support from expectations surrounding the Bloomberg Commodity Index (BCOM) inclusion, effective January 2025. According to Citigroup analysis, this development could attract approximately $2 billion in buying pressure on NY cocoa futures contracts. Additionally, ICE-monitored warehouse inventories held at US ports have compressed to a 9.5-month low of 1,626,105 bags, providing fundamental support.

Global Supply Trends Show Tightening

The International Cocoa Organization (ICCO) substantially revised its 2024/25 global surplus forecast downward to 49,000 MT from 142,000 MT previously. The organization also reduced 2024/25 production estimates to 4.69 MMT from 4.84 MMT. Rabobank further cut its 2025/26 surplus projection to 250,000 MT from 328,000 MT.

However, these positive supply factors weigh against deforestation regulation developments. The European Parliament approved a 1-year delay to the EUDR (EU Deforestation Regulation) on November 26, allowing continued imports from higher-deforestation regions, which maintains cocoa supply channels and pressures prices.

Demand Weakness Creates Headwind

Global cocoa grinding data reveals persistent weakness. Asia reported Q3 cocoa grindings of 183,413 MT, down 17% year-over-year and the lowest for a Q3 in 9 years. European Q3 grindings totaled 337,353 MT, down 4.8% year-over-year and the weakest third quarter in 10 years. North American grindings rose 3.2% to 112,784 MT, though new reporting entities skewed comparability.

Production Constraints in Secondary Markets

Nigeria, the world’s fifth-largest cocoa producer, faces production headwinds. The Nigerian Cocoa Association projects 2025/26 production will decline 11% year-over-year to 305,000 MT from the projected 344,000 MT for 2024/25. September exports remained flat at 14,511 MT.

Historical Context

The commodity has experienced dramatic volatility recently. ICCO documented a record 2023/24 deficit of -494,000 MT, marking the largest shortfall in over 60 years, with production falling 12.9% to 4.368 MMT. The transition to a 49,000 MT surplus in 2024/25 represents the first surplus in four years, with production rising 7.4% to 4.69 MMT.

Today’s price weakness reflects market participants weighing favorable West African weather against structural support from index inclusion and tightening supply expectations, illustrating the complex dynamics shaping cocoa’s near-term trajectory.