Cocoa futures closed lower on Friday, weighed down by softening demand indicators in key consumer markets, even as underlying supply risks and geopolitical tensions offered some support.
July cocoa on ICE New York fell 0.78 per cent to settle lower, while the May contract in London declined 0.51 per cent, reflecting bearish sentiment driven largely by weakening chocolate consumption trends in North America and Europe.
Recent retail data has raised concerns about demand resilience. Market tracker Circana reported that chocolate candy sales in North America declined 1.3 per cent year-on-year in the 13 weeks to March 22. Additional data from Bloomberg Intelligence showed that Easter-season chocolate sales, typically a peak consumption period, fell about 5 per cent compared to last year.
Further evidence of slowing demand came from processing data. The National Confectioners Association reported a 3.8 per cent year-on-year drop in North American cocoa grindings for the first quarter. In Europe, grindings fell 7.8 per cent, according to the European Cocoa Association, marking the lowest first-quarter level in 17 years and undershooting expectations. Asia offered a rare bright spot, with grindings rising 5.2 per cent year-on-year, as reported by the Cocoa Association of Asia.
On the supply side, ample near-term availability is also weighing on prices. Cocoa inventories monitored by ICE have climbed to a 20-month high, reinforcing perceptions of comfortable supply in the current market. Shipments from Ivory Coast, the world’s largest cocoa producer, have remained steady at 1.48 million metric tonnes for the current marketing season, matching last year’s pace.
However, the supply outlook remains less certain. Adverse weather conditions continue to threaten production in West Africa, with drought affecting large portions of both Ivory Coast and Ghana. Policy shifts are also in focus, as both countries have reduced farmgate prices paid to cocoa farmers, a move that could impact future output.
In Nigeria, the world’s fifth-largest producer, export and production figures point to tightening supply. February exports fell 4.6 per cent year-on-year, while output for the 2025/26 season is projected to decline by 11 per cent, according to the Cocoa Association of Nigeria.
Concerns that a prolonged U.S.–Iran conflict could disrupt global shipping routes through the Strait of Hormuz have lent some support to cocoa prices by raising freight, fuel, and input costs.
Latest data shows speculative funds have built significant net short positions in New York cocoa futures, increasing the potential for a short-covering rally if market sentiment shifts.
Looking ahead, forecasts remain mixed. While International Cocoa Organization expects a modest global surplus in the current season, its first in four years, other analysts project larger surpluses in the coming years. Conversely, banks such as Rabobank have trimmed surplus estimates, citing tightening supply conditions.
