Cocoa Prices Plunge to 2-Month Lows Amid Weak Demand, Ample Supply

Cocoa futures prices experienced a sharp decline on Wednesday, falling to their lowest levels in two months, driven by signs of weak global demand and abundant supply expectations. September ICE New York cocoa (CCU26) closed down 4.98%, while September ICE London cocoa #7 (CAU26) also fell by 4.84%. This downturn was primarily fueled by disappointing grind data from Europe, intensifying selling pressure in the market.

The primary catalyst for this price slump was the release of second-quarter European cocoa grindings data by the European Cocoa Association (ECA). The report, published last Thursday, indicated that European cocoa grindings declined by 4.6% year-on-year to 316,366 metric tons. This drop was significantly larger than the market expectation of a 1.5% decrease and marked the weakest second-quarter performance in six years. This data was widely interpreted as a strong signal of weakening cocoa demand across the continent.

However, the global demand picture presented a mixed outlook across regions. Contrary to the European decline, second-quarter North American cocoa grindings unexpectedly rose by 7.7% year-on-year to 109,659 metric tons, according to the National Confectioners Association (NCA). This increase surpassed expectations, somewhat alleviating demand fears in the region. Similarly, data from the Cocoa Association of Asia (CAA) showed a robust 25% year-on-year increase in Asian cocoa grindings for the second quarter, reaching 224,646 metric tons.

On the supply side, cumulative data from Ivory Coast revealed that farmers shipped 2.10 million metric tons of cocoa to ports during the current marketing year (October 1, 2025, through July 19, 2026), marking a 21% increase from the same period a year ago. Furthermore, Bloomberg reported that Nigerian cocoa exports in June surged by 30% year-on-year to 18,922 metric tons. The rise in ICE cocoa inventories to a two-year high of 3,301,990 bags further reinforced the perception of ample supply in the market.

Cocoa prices had previously rallied sharply over the past month, partly due to heavy rains in Ivory Coast and Ghana, which had flooded roads and threatened global supplies. However, the current abundance of supply, coupled with a slowdown in demand, particularly in Europe, became the main factors reversing this rally. Market analysts are also closely monitoring farmer price cuts in West Africa and the potential impact of the El Niño weather phenomenon.

Looking ahead, the outlook remains complex. The US Climate Prediction Center indicated that the El Niño weather pattern, which emerged across the equatorial Pacific last month, is likely to be one of the strongest in over 75 years. This could bring warmer, drier conditions to West Africa, potentially reducing cocoa yields. Early surveys of the 2026/27 Ivory Coast cocoa crop show below-average cherelle formation, signaling a weak outlook for the main harvest beginning in September, with an estimated 1.8 million metric tons, down 18% from 2.2 million metric tons in 2025/26. StoneX, citing El Niño risks, cut its 2026/27 global cocoa surplus estimate from 267,000 metric tons to 149,000 metric tons. These factors suggest that despite the current short-term supply surplus, medium to long-term price support could emerge.