Higher cocoa supply puts prices under significant pressure

The cocoa market fell sharply over the past week. Friday in particular saw steep declines. In New York, the December contract lost 7.7% on the day and closed at $5,327 per tonne. London fell 7.5% to £3,934 per tonne. Over the week as a whole, prices declined by 11% and 9% respectively. This has wiped out a significant part of the price gains recorded in August.The market is mainly being weighed down by higher supply in the short term. Production in Ivory Coast recovered strongly last season. Exchange stocks are also increasing. In early September, ICE stocks reached their highest level in two years. Processor Barry Callebaut also said earlier this month that the global market is currently well supplied.The start of the new season in Ivory Coast is also playing a role. Since 1 September, almost 26,000 tonnes of cocoa have arrived at the country's ports. Arrivals are expected to accelerate in the coming weeks. A new marketing system is intended to help cocoa move more quickly to export ports.On the demand side, the signals are less clear-cut. Cocoa processing in Ivory Coast rose by more than 21% year on year in August to 47,646 tonnes. Processing for the season up to and including August is 8.4% higher. However, previously published figures for the second quarter showed a 4.6% decline in European processing. Processing increased in North America and Asia.New season remains uncertainDespite the sharp fall in prices, concerns about the 2026/27 crop have not disappeared. Early estimates point to lower production in both Ivory Coast and Ghana. Early forecasts for Ivory Coast put production at around 1.8 million tonnes, approximately 18% below last season. Estimates for Ghana vary. COCOBOD is targeting a crop of 650,000 tonnes in the new season, while the 2025/26 crop stands at 750,000 tonnes.Weather risks add to the uncertainty. The development of El Niño could bring warmer and drier conditions to West Africa later in the season. Partly for this reason, StoneX has reduced its forecast for the global cocoa surplus in 2026/27 to just 25,000 tonnes. Transgraph expects a surplus of 80,000 tonnes, compared with 415,000 tonnes in the current season.