After two years of agonizing scarcity and record-breaking price hikes, the global cocoa industry is facing a dramatic shift. New data confirms that the era of supply deficits is ending, as a massive production rebound in West Africa is projected to flood the market, potentially further driving prices into a downward spiral.
The Great Rebound: Statistics of a Surplus
The 2025/26 crop season is set to be a transformative year for global supply. Following two seasons of low production volumes, several top analysts are now raising alarms on a significant inventory overhang. A couple of weeks ago, StoneX forecasted a global cocoa surplus of 287,000 metric tonnes (MT) for the 2025/26 season, with a follow-up surplus of 267,000 MT expected for 2026/27. Other industry reports are even more optimistic, indicating a potential surplus nearing 305,000 tonnes.
This abundance is reflected in stockpiles as the International Cocoa Organization (ICCO) reported on January 23 that global cocoa stocks rose 4.2% year-on-year to 1.1 million metric tonnes. Furthermore, ICE-monitored cocoa inventories recently climbed to a 4.25-month high of 1,942,367 bags, signaling that robust global supplies are beginning to weigh heavily on market sentiment.
Demand Destruction: Why Buyers are Backing Away
While supply is surging, demand has hit a wall. Consumers, hit by the high cost of chocolate over the last two years, are beginning to reduce their consumption, creating “slack demand” that weighs heavily on prices. Total global cocoa grindings, a primary measure of consumption, are now estimated at 4.60 million tonnes, a notable drop from the 4.81 million tonnes recorded in the previous cycle.
Specific industry leaders are already feeling the impact of this “demand destruction.” Barry Callebaut AG, the world’s largest bulk chocolate maker, reported a -22% decline in sales volume for its cocoa division for the quarter ending November 30. Grinding slowdowns are evident globally; European grindings fell -8.3% to their lowest Q4 level in 12 years, Asian grindings dropped -4.8%, and North American growth remained stagnant at a mere +0.3%.
The Price Trajectory: 2023 to February 2026
The market has moved through three distinct phases in the last three years. In 2023, prices began a steady ascent as aging trees and poor weather in West Africa signaled the start of a supply squeeze. This culminated in the period between 2024 and mid-2025, where extreme scarcity drove prices to historic highs. Market panic pushed cocoa above $10,000 per tonne, forcing chocolate makers to hike prices and shrink portions.
However, by February 2026, the tide has turned completely. Favorable growing conditions in Ghana, Ivory Coast and other West African countries have significantly boosted harvests. Farmers in Ghana and Ivory Coast report larger and healthier pods compared with last year, with the latest pod counts sitting 7% above the five-year average. This material increase in production has caused prices to hammer downward as the market adjusts to the looming 305,000-tonne surplus.
The Farmgate Crisis: Debts, Borrowing, and Underrecoveries
This market volatility has created a dangerous fiscal dilemma for the world’s two largest producers, Ivory Coast and Ghana. A recent Reuters report suggests that Ivory Coast is considering a significant reduction in its farmgate price, following a similar move taken by Ghana.
During the price peaks of 2024, both nations raised farmgate prices to historic levels to protect farmers. However, as global market prices fall, keeping these prices high becomes financially unsustainable. When the government-guaranteed price to farmers is higher than the price at which the state can sell cocoa on the global market, the state suffers an “underrecovery,” which is essentially a net loss on every bag produced.
To pay farmers these high prices during a market slump, cocoa boards are often forced into heavy borrowing from international lenders. Continued borrowing to subsidize farmgate prices leads to mounting national debt and interest obligations. This can eventually create a cycle of debt that cripples the cocoa sector’s ability to fund essential inputs like fertilizers and seedlings for future seasons.
Conclusion
With a surplus of up to 305,000 tonnes and demand at a decade-low, the pressure on global prices is relentless. For West African governments, the challenge is no longer managing scarcity, but managing the fiscal fallout of a price collapse while trying to maintain the livelihoods of millions of farmers.
