Cocoa Prices Rally Amid Supply Tightening in Ivory Coast

Cocoa futures markets surged on Tuesday, with ICE NY March cocoa contracts jumping +90 points (+2.14%) and ICE London March cocoa contracts climbing +91 points (+3.04%). The gains marked a second consecutive day of price strength, driven primarily by slowing port deliveries from the world’s leading cocoa producing region. According to Monday’s shipment data, Ivory Coast farmers delivered 1.23 million metric tons of cocoa to local ports during the current marketing year (October 1, 2025 through February 1, 2026), representing a 4.7% decline compared to 1.24 million metric tons shipped during the same period last year. This supply slowdown has triggered short covering activity across the futures complex, providing immediate price support.

Short-Term Price Recovery Follows Port Delivery Decline

The resurgence in cocoa prices stands in sharp contrast to last week’s pessimistic market sentiment. As recently as Friday, ICE NY cocoa hit a 2.25-year low while London’s benchmark fell to 2.5-year lows, pressured by persistent global oversupply and lackluster buyer demand. Market forecasters including StoneX had signaled significant surplus conditions, with predictions of 287,000 metric tons of excess cocoa for the 2025/26 season and 267,000 metric tons for 2026/27. The unexpected tightening in Ivory Coast shipments has temporarily disrupted this bearish narrative, prompting algorithmic traders to cover short positions and investors to reassess near-term supply dynamics.

Demand Weakness Continues to Weigh on Fundamentals

Despite the recent price rally, underlying demand conditions remain challenged across all major chocolate manufacturing regions. Barry Callebaut AG, the world’s largest producer of bulk chocolate, disclosed a 22% volume decline in its cocoa division during the quarter ending November 30, citing subdued market demand and a strategic pivot toward higher-margin products. This demand deterioration is corroborated by grinding data from major consuming regions: Q4 European cocoa grindings fell 8.3% year-over-year to 304,470 metric tons, substantially worse than expectations of 2.9% decline and marking the weakest Q4 performance in twelve years. Asian grinding activity contracted 4.8% year-over-year to 197,022 metric tons in Q4, while North American grindings expanded merely 0.3% year-over-year to 103,117 metric tons. These figures underscore persistent consumer resistance to elevated chocolate prices, limiting buyers’ willingness to process significant cocoa volumes.

Inventory Rebound Adds to Supply Pressure

US port inventory levels have rebounded substantially since hitting a 10.5-month low of 1,626,105 bags on December 26. As of Tuesday, ICE-monitored cocoa stocks climbed to 1,782,921 bags, reaching a 2.5-month high and introducing additional bearish pressure on price recovery attempts. This inventory expansion reflects persistent oversupply conditions and highlights the challenge facing producers in clearing existing inventory positions. Meanwhile, international cocoa stocks registered a 4.2% year-over-year increase to 1.1 million metric tons as of the ICCO’s January 23 assessment, further underscoring global glut conditions despite production constraints in some regions.

West African Harvests Signal Potential Supply Recovery

Paradoxically, field conditions in West Africa appear increasingly favorable for output recovery. Tropical General Investments Group recently noted that expected strong growing conditions during February and March will likely support a robust harvest in both Ivory Coast and Ghana, with farmers reporting larger and healthier cocoa pods compared to year-ago levels. Chocolate manufacturer Mondelez confirmed this assessment, noting that current pod counts in West Africa are running 7% above the five-year average and materially higher than last season’s crop. These observations suggest that any near-term supply tightness may prove temporary, as the region’s main harvest season gains momentum with farmer optimism surrounding crop quality.

Supply Constraints from Secondary Producers Offer Limited Support

Nigeria, ranking as the world’s fifth-largest cocoa producer, provides one of the few genuine supply constraints supporting prices. Nigerian exports in November fell 7% year-over-year to 35,203 metric tons, and the country’s Cocoa Association projects 2025/26 production will decline 11% year-over-year to 305,000 metric tons from a projected 344,000 metric tons in the prior year. This production contraction offers modest price support but remains insufficient to offset oversupply signals emanating from Ivory Coast, Ghana, and global inventory levels.

Market Outlook: Temporary Reprieve or Sustained Recovery?

The cocoa market faces conflicting signals heading into the remainder of 2026. Recent supply tightening from Ivory Coast and production declines in Nigeria have interrupted the downtrend, triggering technical short covering and speculative interest. However, the supply recovery anticipated from West Africa, combined with persistently weak demand across major manufacturing centers and elevated global inventory levels, suggests that any price recovery may face considerable resistance at higher levels. International forecasters including Rabobank have moderated their bullish outlook, reducing the 2025/26 surplus estimate to 250,000 metric tons from a November prediction of 328,000 metric tons. This recalibration reflects a more balanced supply-demand trajectory than earlier anticipated, though significant oversupply relative to prior years persists. Ultimately, cocoa price direction will hinge on whether demand recovers alongside supply normalization, or whether producers face a prolonged period of below-average pricing despite improved growing conditions in West Africa.