London Cocoa Futures Collapse Amid Oversupply and Eroding Demand

London cocoa futures are experiencing a dramatic correction as the market confronts a fundamental shift in supply-demand dynamics. The nearest-term London contract has dropped to its lowest level in 2.75 years, mirroring severe weakness across global cocoa markets. This selloff reflects a confluence of bearish factors: robust harvests in West Africa, deteriorating consumption, and mounting inventories that have overwhelmed price support mechanisms.

The scale of the supply imbalance has become unmistakable. Global cocoa stockpiles jumped 4.2% year-over-year to 1.1 million metric tons as of late January, signaling persistent surplus conditions. StoneX forecasted a 287,000 MT surplus for the 2025/26 season, with projections extending into the subsequent year at 267,000 MT. This overabundance has cascaded into warehouse accumulation, with ICE cocoa inventories climbing to a 5.75-month high of 2.16 million bags.

Supply Glut Overwhelms London Cocoa Futures Market

West African producers—which account for over half of global cocoa output—are struggling with their price support mechanisms. Both Ghana and the Ivory Coast, the dominant suppliers, have slashed official farm-gate prices substantially. Ghana reduced its procurement price by nearly 30% for the upcoming harvest season, while the Ivory Coast announced consideration of a 35% reduction ahead of the mid-crop phase beginning in April. These price cuts reflect the international market’s reluctance to purchase at official levels, creating downward pressure throughout the supply chain.

Favorable climatic conditions in the region have amplified supply pressures. Tropical General Investments Group reported that West African growers are cultivating larger and healthier cocoa pods compared to the prior year, signaling robust mid-crop potential for both Ghana and the Ivory Coast. The Ivory Coast’s mid-crop alone typically contributes 400,000 to 450,000 MT, representing approximately one-quarter of annual production. Additionally, Nigerian exports have surged 17% year-over-year to 54,799 MT in December, introducing additional downward pressure despite Nigeria’s traditionally subordinate market position.

Chocolate Makers Resist High Prices, Crushing Global Demand

Demand destruction has become the market’s dominant theme. Barry Callebaut, the world’s largest bulk chocolate producer, disclosed a 22% volume decline in its cocoa division for the November quarter, citing consumers’ resistance to elevated chocolate prices. This retreat extends across consuming regions. European cocoa grindings fell 8.3% year-over-year in Q4 to 304,470 MT—the worst quarterly result in 12 years and significantly steeper than the anticipated 2.9% decline. Asian grindings contracted 4.8% year-over-year to 197,022 MT, while North American grindings barely expanded at 0.3% growth to 103,117 MT.

This demand weakness has become self-reinforcing. Mondelez recently noted that West African pod counts now exceed the five-year average by 7%, and are materially higher than the prior year’s crop. With ample supplies and flagging consumption, chocolate manufacturers continue deferring procurement commitments, extending the bearish cycle.

Production Forecasts Offer Limited Price Support

The sustainability of london cocoa futures at current levels hinges on potential production setbacks in the upcoming season. The Ivory Coast projects a 10.8% decline in 2025/26 output to 1.65 MMT from the prior year’s 1.85 MMT, providing a modest bullish counterweight. Similarly, Nigeria’s Cocoa Association forecasts a 11% year-over-year production drop to 305,000 MT for the season ahead. These anticipated reductions follow ICCO’s December estimate of a 49,000 MT global surplus for 2024/25, marking the first surplus in four years.

However, near-term price supports remain fragile. Shipments to ports in the Ivory Coast totaled 1.31 MMT through mid-February in the current marketing year, down 3.7% from the comparable prior-year period. This modest slowdown offers limited relief to the market. Meanwhile, Rabobank trimmed its 2025/26 surplus forecast to 250,000 MT in February, down from a November estimate of 328,000 MT, suggesting some recognition of production challenges ahead.

The structural imbalance between ample supplies and tepid demand will likely keep london cocoa futures under pressure through the coming season, with price recovery dependent on either sharper production declines or a meaningful revival in chocolate consumption.