Cocoa Market Slump Deepens as Supply Glut Meets Consumer Resistance
Cocoa prices tumbled further on Friday, with benchmark contracts in New York and London hitting their lowest levels in over two years. The sustained downturn reflects a market grappling with an abundance of supply and a notable pullback in demand from chocolate makers and consumers alike.
The sell-off gained momentum after analytics firm StoneX projected significant global cocoa surpluses for the upcoming 2025/26 and 2026/27 seasons. This outlook was bolstered by data from the International Cocoa Organization (ICCO), which reported a year-on-year increase in global stockpiles. The bearish sentiment is a stark reversal from the historic deficits that drove prices to record highs just two years ago.
On the demand side, the pinch is being felt acutely. Barry Callebaut AG, the world's largest industrial chocolate manufacturer, reported a steep 22% drop in sales volume for its cocoa division in its latest quarter, attributing the decline to "negative market demand." This trend is echoed in regional grinding data, a key indicator of consumption. European processing volumes fell 8.3% in the fourth quarter—the weakest Q4 in 12 years—while Asian grindings also declined. North American volumes remained nearly flat.
"Consumers are finally pushing back against elevated chocolate prices," said market analyst Eleanor Vance of AgriSphere Insights. "We're seeing a clear demand destruction phase. Combined with reports of a healthy mid-crop harvest in Ivory Coast, the fundamentals have shifted decisively."
Farmers in West Africa, which produces about two-thirds of the world's cocoa, are reporting favorable growing conditions and healthier pods, raising expectations for the upcoming harvest. Chocolate giant Mondelez noted that cocoa pod counts in the region are running above the five-year average.
However, not all signals point downward. Some producers are withholding beans in response to lower prices. Shipments from top grower Ivory Coast are running slightly behind last year's pace. Furthermore, exports from Nigeria, the fifth-largest producer, fell in November, and its annual production is forecast to drop.
"The market is overreacting to short-term data," argued Marcus Thorne, a commodities trader with a decade of experience in soft markets. "The structural deficit hasn't vanished. The ICCO's surplus estimate for this year is tiny—a rounding error in a 5-million-ton market. Once this harvest passes, attention will return to long-term challenges like crop disease and aging trees."
This view finds some support in revised forecasts. Both the ICCO and Rabobank have recently trimmed their surplus projections for the current and next season, suggesting the supply rebound may be more fragile than it appears.
The price collapse has sparked strong reactions across the industry. Sarah Chen, a sustainability advocate for smallholder farmers, expressed sharp criticism: "It's a brutal cycle. Farmers bore the brunt of climate and disease during the shortage, seeing little of the price premium. Now, they're the first to suffer from the slump. This volatility makes long-term investment in sustainable farming impossible. The big traders and chocolate companies are the only winners here, locking in cheap supplies after years of high margins."
As the market searches for a floor, the focus will remain on West African harvest progress and whether consumer demand shows signs of recovery ahead of the key Easter and summer confectionery seasons.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com.