Cocoa Prices Decline Amid Favorable Weather in West Africa

Cocoa prices have experienced a significant decline, with March ICE NY cocoa closing down 6.42% and March ICE London cocoa down 7.05% on Monday. This drop is attributed to favorable weather conditions in West Africa, particularly in the Ivory Coast and Ghana, which have positively impacted cocoa crop development. Reports indicate that cocoa farmers are benefiting from a balanced mix of rain and sunshine, leading to an increase in cocoa pod development. Additionally, increased cocoa arrivals at ports in the Ivory Coast have contributed to the downward pressure on prices, with shipments reaching 895,544 metric tons from October 1 to December 14, a slight increase from the previous year.

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The International Cocoa Organization (ICCO) recently revised its global cocoa surplus estimate for 2024/25 to 49,000 metric tons, down from 142,000 metric tons, while also lowering the global production estimate to 4.69 million metric tons. Rabobank echoed this sentiment by reducing its 2025/26 global cocoa surplus estimate to 250,000 metric tons. The decline in ICE cocoa inventories, which fell to a nine-month low of 1,655,457 bags, has also provided some support for cocoa prices. However, the overall outlook for cocoa supplies remains ample, leading to price pressures.

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The European Parliament's recent decision to delay the implementation of the deforestation law (EUDR) has further influenced cocoa prices. This regulation aims to address deforestation linked to key commodities, including cocoa, but the delay allows continued imports from regions where deforestation is prevalent. This regulatory shift has contributed to a perception of ample cocoa supplies, which has weighed on market prices.

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Weak global demand for cocoa has been a significant factor in the price decline. Reports from major chocolate manufacturers, including Hershey, indicated disappointing sales during the Halloween season, which typically represents a substantial portion of annual candy sales. Additionally, cocoa grindings in Asia and Europe have shown declines, with Q3 Asia cocoa grindings falling by 17% year-on-year and European grindings dropping by 4.8% year-on-year. In North America, while grindings rose slightly, overall sales volume of chocolate candy decreased by over 21% in recent months.

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Despite the favorable weather conditions and increased production forecasts, some analysts express concern over the long-term sustainability of cocoa prices given the current demand trends. The Cocoa Association of Nigeria has projected an 11% decline in cocoa production for the 2025/26 crop year, which may impact future supply dynamics. The ICCO's estimates indicate a potential surplus for 2024/25, marking a shift from previous deficits, but market participants remain cautious about the implications of ongoing demand challenges.

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• “Chocolate maker Mondelez recently said that the latest cocoa pod count in West Africa is 7% above the five-year average and "materially higher" than last year's crop.” — Mondelez

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• “Cocoa prices were undercut after the European Parliament on November 26 approved a 1-year delay to the deforestation law, keeping cocoa supplies ample.” — Market Analyst

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This comprehensive overview highlights the interplay of favorable weather, regulatory changes, and shifting demand dynamics that are currently shaping the cocoa market.

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