Chocolate Market Faces Pressure as Cocoa Prices Enter Bear Territory

Cocoa futures markets extended their sharp selloff this week, with March ICE NY cocoa closing down 258 points (-8.00%) and March ICE London cocoa dropping 140 points (-6.17%). The decline marks the continuation of a six-week downtrend that has pushed prices to their lowest levels in 2.75 years. What’s driving this weakness in cocoa extends beyond simple price movements—it reflects a fundamental shift in the balance between global supply and demand that is reshaping the chocolate industry’s economics.

Cocoa Prices Sink Under Weight of Growing Inventories

The mechanics of this market collapse are straightforward: as prices fall, buyers grow more hesitant to purchase at current rates, betting that further declines are coming. International cocoa buyers from major chocolate manufacturers are refusing to pay official prices for beans in Ivory Coast and Ghana, instead adopting a wait-and-see approach. This reluctance has created a supply bottleneck in the opposite direction—inventories are surging rather than declining. ICE cocoa stocks recently climbed to a five-month high of 2,065,040 bags, a clear signal that the market cannot absorb available supplies at prevailing prices.

Currency movements have provided some offset to London-based cocoa traders. The British pound weakened to a four-week low, which technically supported cocoa prices quoted in sterling by making them cheaper for international buyers. However, this minor tailwind has proven insufficient to counteract the fundamental bearish pressures.

Cocoa-Producing Nations Cut Official Prices in Attempt to Stabilize Market

Policymakers in the world’s largest cocoa-producing regions have begun responding to the crisis. Ghana slashed the official price it pays cocoa farmers by nearly 30% for the 2025/26 growing season, a dramatic move designed to make their beans more competitive in an oversupplied global market. Reuters reported that Ivory Coast is considering an equally severe reduction. Together, these two nations account for more than half of global cocoa output, making their pricing decisions crucial to the market’s direction.

Despite these interventions, the broader market fundamentals remain bleak. StoneX forecasted a global cocoa surplus of 287,000 metric tons (MT) in the 2025/26 season, with an even larger 267,000 MT surplus projected for 2026/27. The International Cocoa Organization (ICCO) reported that global cocoa stocks rose 4.2% year-over-year to 1.1 million metric tons, underscoring the magnitude of oversupply.

Chocolate Makers Pull Back as Consumers Resist High Prices

The demand side of the cocoa-chocolate equation has deteriorated sharply as consumers increasingly balk at premium chocolate prices. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, reported a 22% decline in sales volume within its cocoa division for the quarter ending November 30. The company attributed this collapse to “negative market demand and a prioritization of volume toward higher-return segments,” signaling that the chocolate industry is shifting away from high-cocoa-content products.

Grinding data across major consuming regions tells the same story. The European Cocoa Association reported that fourth-quarter European cocoa grindings fell 8.3% year-over-year to 304,470 MT—a steeper decline than the expected 2.9% drop and marking the weakest fourth quarter in 12 years. Asian cocoa grindings similarly weakened, with the Cocoa Association of Asia reporting a 4.8% year-over-year decline to 197,022 MT in the same period. North American grindings provided the only glimmer of hope, rising just 0.3% year-over-year to 103,117 MT—essentially flat growth.

These grinding figures represent the true measure of cocoa demand, as they reflect actual factory utilization rather than financial trading positions. The consistent weakness across all major consuming regions underscores that chocolate manufacturers are genuinely cutting back production in response to diminished consumer appetite.

West African Growing Conditions Support Abundant Cocoa Harvest

Rather than providing relief, the agricultural outlook compounds the bearish picture. Favorable growing conditions across West Africa are expected to produce a robust February-March cocoa harvest in Ivory Coast and Ghana, with farmers reporting larger and healthier pods compared to the same period last year. Mondelez recently noted that the latest pod count in West Africa stands 7% above the five-year average and is “materially higher” than last year’s crop level.

With the Ivory Coast’s main harvest already underway and farmers expressing optimism about crop quality, the supply situation looks set to worsen before it improves. Nigeria, the world’s fifth-largest cocoa producer, has also contributed to supply pressures—Bloomberg reported that Nigerian cocoa exports in December surged 17% year-over-year to 54,799 MT, adding to the global glut.

One modest offsetting factor is a slowdown in cocoa deliveries from the Ivory Coast to ports. Cumulative data through February 15, 2026 showed that farmers shipped 1.30 million metric tons to ports during the current marketing year (October 1, 2025 through February 15, 2026), down 3.0% compared to 1.34 million metric tons in the same period a year earlier. However, this logistical constraint appears temporary and insufficient to counterbalance the structural oversupply.

Production Forecasts Suggest Limited Near-Term Relief

Looking ahead, production forecasts offer little solace to cocoa bulls. Nigeria’s Cocoa Association projects that Nigerian cocoa production for 2025/26 will decline 11% year-over-year to 305,000 MT, down from a projected 344,000 MT for 2024/25—the sole bright spot in an otherwise bearish outlook. This anticipated Nigerian production decline stems from sustainability concerns and crop disease pressures.

The broader global picture remains oversupplied. The ICCO estimated a 2024/25 global cocoa surplus of 49,000 MT in December, marking the first surplus in four years, while also reporting that global cocoa production climbed 7.4% year-over-year to 4.69 million metric tons. Most recently, Rabobank trimmed its 2025/26 global cocoa surplus estimate to 250,000 MT from a November forecast of 328,000 MT—a modest downward revision that nonetheless still points to substantial overproduction.

Outlook: Cocoa and Chocolate Face Extended Structural Challenges

The cocoa market now finds itself in a challenging equilibrium: prices have fallen sharply enough to deter new selling, yet remain high enough that consumers resist chocolate purchases and chocolate manufacturers reluctantly reduce cocoa grinding. Supply growth outpaces demand recovery, inventories remain elevated, and both major producing nations and chocolate makers are adjusting downward rather than supporting current levels.

For the chocolate industry, this environment presents a dual challenge. While lower cocoa costs should theoretically improve margins, flat or declining demand means that volume benefits may fail to materialize. The result is likely to be an extended period of pricing pressure and modest demand growth as the cocoa and chocolate markets navigate this structural rebalancing.