Global Cocoa Market Under Pressure: Understanding Nigeria's Critical Role in Cocoa Price Movements

The cocoa market is experiencing a significant downturn, with both New York and London contracts sliding sharply. March ICE NY cocoa has dropped 6.18% while London cocoa has fallen 6.57%, hitting their lowest levels in roughly 2 years. This extended decline reflects a fundamental mismatch between supply and demand dynamics that extends far beyond simple market fluctuations, particularly affecting suppliers like Nigeria which play an outsized role in global cocoa price determination.

Demand Weakness Continues to Weigh on Market Sentiment

The primary culprit behind falling cocoa prices remains stubborn demand destruction across major consuming regions. The world’s largest bulk chocolate manufacturer, Barry Callebaut AG, reported a concerning 22% drop in sales volume within its cocoa division for the quarter ending November 30, citing weak consumer interest as chocolate prices remain elevated. This hesitation among end-users to purchase at current price levels has rippled across the entire supply chain.

Regional grindings data—a key indicator of actual cocoa demand—paint a bleak picture. European cocoa processors reduced their Q4 activity by 8.3% year-over-year to 304,470 metric tons, significantly worse than the anticipated 2.9% decline. Asian grinding operations also contracted, sliding 4.8% year-over-year to 197,022 MT during the same quarter. North American cocoa grindings managed only a 0.3% year-over-year increase to 103,117 MT, demonstrating tepid demand across all major consumption zones.

Nigeria’s Exports Signal Market Stress Despite Strategic Importance

As the world’s fifth-largest cocoa producer, Nigeria holds considerable influence over global cocoa price in international markets. Recent export trends from Nigeria underscore growing supply pressures across different production regions. The nation’s November cocoa exports fell 7% year-over-year to 35,203 metric tons, reflecting the challenging environment facing producers.

Looking forward, Nigeria’s Cocoa Association has projected a significant contraction in the nation’s 2025/26 cocoa production, forecasting output will decline 11% year-over-year to 305,000 metric tons compared to the projected 344,000 MT for the 2024/25 crop year. This anticipated reduction from Nigeria, though constructive for cocoa price mechanics, underscores deeper structural challenges within the cocoa production ecosystem. The Nigeria cocoa price situation remains sensitive to these production shifts, as smaller harvests typically support underlying price levels.

Abundant Supplies and Rising Inventories Create Competing Pressures

Despite production concerns from Nigeria and other suppliers, global cocoa stocks tell a different story. The International Cocoa Organization (ICCO) reported that 2024/25 global cocoa stocks rose 4.2% year-over-year to 1.1 million metric tons, establishing ample supplies that continue to weigh on values. Simultaneously, cocoa inventories held at US ports have climbed to a 2-month high of 1.75 million bags, reversing earlier lows from late December. This inventory recovery represents a bearish signal for price appreciation.

West African growing conditions have also favored supply expansion. The February-March cocoa harvest in Ivory Coast and Ghana is expected to yield robust volumes, with farmers reporting larger and healthier pods than the prior year comparison. Chocolate makers have noted cocoa pod counts in West Africa running 7% above their five-year average and materially elevated compared to last year’s crop.

Contracting Supply Outlook Offers Limited Support

On the constructive side for cocoa markets, the ICCO substantially reduced its 2024/25 global cocoa surplus estimate to 49,000 metric tons from a previous projection of 142,000 MT. This tightening of surplus expectations, along with a downward production revision to 4.69 million metric tons from 4.84 MMT previously, suggests the market structure is normalizing after years of deficit conditions.

The Ivory Coast, the world’s largest cocoa producer, is shipping cocoa to ports at a reduced pace this marketing year. Cumulative shipments totaled 1.16 million metric tons through January 18, representing a 3.3% year-over-year decline compared to 1.20 million MT during the same period last year. These softer flows from Ivory Coast, combined with emerging production challenges from Nigeria and other West African nations, have begun offering price support despite other headwinds.

Rabobank’s latest outlook for 2025/26 also reflects tightening supply dynamics, with the bank cutting its global cocoa surplus forecast to 250,000 MT from its prior November estimate of 328,000 MT. This sequential compression suggests market participants are growing more concerned about future supply availability.

Policy and Market Outlook

The European Parliament’s recent decision to implement a one-year delay to deforestation regulations (EUDR) has complicated the supply picture. This reprieve allows EU nations to continue importing cocoa and other agricultural commodities from deforestation-prone regions in Africa and Southeast Asia, effectively keeping supplies ample despite sustainability concerns.

The cocoa market remains caught between conflicting forces: demand destruction at current price levels versus emerging supply constraints from major producing regions. While Nigeria and other suppliers face production headwinds, global stocks remain elevated and consuming regions continue to reduce processing activity. The resolution of these competing dynamics will ultimately determine whether cocoa prices stabilize or face further pressure in coming weeks.