Cocoa price decline does not continue

At the end of January, the cocoa price in London fell through a clear support level. Better harvest expectations and weak demand were the underlying reasons. However, it soon became clear that the decline did not continue, and this has everything to do with the short-term outlook. The cocoa price has been fairly stable for the past two weeks. On January 28, the cocoa price in London reached a new low. For the first time since November, the price in London, converted, was below $4,000 per ton. Since then, the price has risen to $4,098.74. Despite the stabilization, the undertone of the cocoa market is still declining. An important reason for this is that chocolate sales are not strong. This keeps the demand for cocoa relatively weak, especially in the European Union. Barry Callebaut, the world's largest chocolate producer, reported a 22% decrease in sales volumes from its cocoa division in the quarter ending November 30. The sharp decline is attributed to weak demand and a strategic shift towards segments with higher margins within cocoa. Due to higher prices, the revenue remains relatively stable, while the volumes take a significant step back. Also, the processing data underscore the extremely weak European demand. European processing data for the fourth quarter of 2025 show that 8.3% less cocoa was processed compared to a year earlier. This marked the lowest processing level in 12 years, while Asia showed a decline of 4.8% and North America recorded only minimal growth of 0.3%. Abundant supply also leads to a decline In contrast to the weak demand, a relatively abundant supply is expected soon. StoneX anticipates a global cocoa surplus of 287,000 tons in the 2025/26 season and another 267,000 tons in 2026/27. Meanwhile, the International Cocoa Organization (ICCO) reported that global cocoa stocks have increased by 4.2% year-on-year to 1.1 million tons. Additionally, favorable weather conditions in West Africa continue to exert downward pressure on prices. Producers in Ivory Coast and Ghana report larger and healthier pods. Both Tropical General Investments Group and Mondelez point to an above-average number of fruits, well above the weak level of the last two years, but also above the five-year average. Short-term tightness The fact that the market does not continue its sharp decline is due to lower availability in the short term. West African producers are holding back cocoa due to low prices, resulting in exports from Ivory Coast being about 3.2% lower than last year in the current harvest season, as reported in specialized trade media. A clear production decline is also expected in Nigeria, with lower export volumes and an estimated production setback of 11% in 2025-2026.