Cocoa Market Tightens as Ivory Coast Shipments Lag: Here's What's Driving the Rally

Supply Squeeze in the World’s Top Producer

Cocoa is having quite the moment. March ICE NY cocoa (CCH26) jumped +3.08% today while March ICE London cocoa (CAH26) gained +2.57%, but the real story behind these moves tells you something important about global cocoa fundamentals.

The headline culprit? Reduced cocoa flows from the Ivory Coast. Through January 4 of this new marketing year (which started October 1), the country has shipped just 1.073 MMT of cocoa to ports—that’s a -3.3% decline compared to 1.11 MMT during the same stretch last year. For context, the Ivory Coast dominates global cocoa production, so when its shipments slow, the entire market pays attention.

The Index Buying Story Everyone’s Watching

Beyond physical supply tightness, cocoa is getting a boost from an unexpected corner: index flows. Cocoa futures just got added to the Bloomberg Commodity Index (BCOM) this month, and analysts at Citigroup reckon this could unleash as much as $2 billion in index-related buying of NY cocoa futures. That’s the kind of mechanical buying that can sustain momentum once it starts flowing.

Why the Supply Outlook Just Got Tighter

Production numbers tell the real tale. The International Cocoa Organization (ICCO) recently slashed its 2024/25 global cocoa surplus estimate—cutting it all the way down to just 49,000 MT from a prior forecast of 142,000 MT. They also lowered their 2024/25 cocoa production estimate to 4.69 MMT from 4.84 MMT. Meanwhile, Rabobank similarly reduced its 2025/26 surplus projection to 250,000 MT versus their November call of 328,000 MT. This isn’t noise; it’s a structural tightening.

Nigeria, the world’s fifth-largest cocoa producer, is adding to supply pressure. The country’s Cocoa Association expects 2025/26 production to fall -11% year-over-year to 305,000 MT. That’s meaningful when global supplies are already constrained.

Inventory Levels Are at Critical Lows

Another factor supporting prices: US storage. ICE-monitored cocoa inventories at American ports hit a 9.5-month low of 1,626,105 bags on December 26. When buffer stocks drain this quickly, it signals real demand meeting constrained supply.

The Demand Side Tells a Different Story

Not everything is bullish, though. Cocoa grinding data—basically the real-world measure of chocolate maker activity—paints a weaker picture. Asia’s Q3 cocoa grindings plummeted -17% y/y to just 183,413 MT, marking the smallest Q3 result in 9 years. Europe’s grinddown fell -4.8% y/y to 337,353 MT, the weakest Q3 in a decade. North America managed a +3.2% y/y rise to 112,784 MT, but new reporting entities skewed those numbers higher.

The Regulatory Wildcard

Europe’s deforestation law (EUDR) created some bearish pressure in late November when the EU Parliament approved a 1-year delay. That postponement lets member states keep importing agricultural products from regions where deforestation persists, including key cocoa suppliers in Africa, Indonesia, and South America. More lenient sourcing rules could eventually add supply, even if the immediate impact is limited.

The Bottom Line

Cocoa’s current rally reflects a collision of tightened physical supplies, reduced production forecasts, historic inventory lows, and fresh index buying demand. Meanwhile, weak grinding activity globally suggests demand isn’t running hot—which means prices are being driven primarily by supply-side mechanics rather than consumption strength. That’s the kind of market that can sustain upside if fundamentals remain firm, but it’s also vulnerable to demand shocks.