Understanding Cocoa Price Slump

Cocoa Price Slump: A Synopsis

Cocoa price has declined sharply in early 2026, reversing the record highs seen in late 2024. Futures reached an all-time peak in December 2024 following poor harvests across West Africa. However, in the beginning of this year, prices have fallen by nearly 50%, bringing the market back to levels last observed in late 2023, around $3,778 per tonne.

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The movement reflects a shift in underlying market conditions. Supply has improved and demand has softened. Global cocoa production increased by about 7.6% in the 2024/25 season to roughly 4.70 million tonnes, easing the tightness that previously supported elevated prices.

Grinding data highlights this trend. In Europe, the largest consuming region, cocoa grindings declined by around 3% year-on-year in the fourth quarter, marking the lowest fourth-quarter level in over a decade. Asia has seen a more pronounced contraction, with grindings estimated at a ten-year low. And although North America has recorded a slight increase, the overall data points to a moderation in demand.

High retail prices have contributed to this slowdown. Consumers have reduced discretionary spending on chocolate, and manufacturers have adjusted volumes accordingly. Barry Callebaut, the world’s leading manufacturer of high-quality chocolate and cocoa products, reported a 22% decline, citing weaker demand. And these adjustments have fed back into the futures market.

However, futures prices do not fully reflect realised costs across the value chain. Many large buyers secured cocoa at elevated prices. As a result, input costs for these manufacturers remain high, and the impact of lower futures prices may take time to be reflected in end-product pricing and consumption patterns.

Recovery, Policy, and Risk

West Africa remains central to global cocoa supply. Current indicators suggest stronger output than previously expected. Field reports point to healthier pods in Côte d’Ivoire and Ghana, with pod counts approximately 7% above recent averages. Early rains in late 2025 have supported crop development and improved expectations for the 2026 harvest.

At the same time, pricing policy has required adjustment. Ghana and Côte d’Ivoire set relatively high farmgate prices for the 2025/26 season, based on earlier market conditions. As global prices declined, these fixed prices became less aligned with international benchmarks. Ghana reduced its farmgate price by 28.6% in mid-February. In Côte d’Ivoire, exporters resisted purchasing at the official price, leading to a buildup of unsold stocks. The regulator intervened by purchasing around 100,000 tonnes to preserve quality. Both countries are now reviewing pricing approaches, with indications of greater coordination.

For Nigeria, the liberalised pricing framework meant farmers captured outsized gains during the recent upswing, as higher global prices coincided with a sharp depreciation of the naira, lifting naira-denominated farmgate returns. In many cases, these windfall earnings were directed toward immediate consumption such as expanding households or undertaking religious pilgrimages, rather than being reinvested in farm productivity. The reversal now works in the opposite direction, as the naira strengthens against the dollar and international prices soften, causing incomes to adjust downward quickly in the absence of an administered price buffer. This underscores the cyclical nature of cocoa markets and the importance of using periods of elevated prices to rehabilitate trees and strengthen long-term productivity, rather than treating such gains as permanent income.

Despite improved near-term supply conditions, structural factors remain relevant. Cocoa production in West Africa faces ongoing challenges. Tree stocks are aging. Rainfall patterns are becoming more variable, as we have covered in Vestance’s 2026 outlook. A prolonged dry period, such as shortened Harmattan, could reduce yields by an estimated 8 to 10%. Disease pressure, including Cocoa Swollen Shoot Virus and fungal infections, continues to affect key producing areas. These factors contribute to underlying uncertainty in supply.

Near-Term Balance

If current weather conditions persist, West African output may remain close to historical averages. This would support relatively stable global supply. Demand trends will depend on how quickly lower futures prices translate into lower retail prices and improved consumption. At present, the market reflects a combination of improved supply conditions and softer demand. Future price direction will depend on the interaction between these factors, alongside weather developments and policy responses in key producing countries.

EUDR Concerns

An additional layer of risk is the European Union Deforestation Regulation (EUDR), which is scheduled to take effect from late 2026 for most market participants. The regulation requires that all cocoa entering the EU market be deforestation-free, legally produced, and fully traceable to farm-level geolocation. For West African exporters, this introduces compliance costs and potential market access constraints at a time when prices are already correcting. This is a dynamic that has been highlighted in earlier Vestance analysis of the cocoa trade and regulatory outlook.

The traceability requirement is particularly binding. Cocoa must be linked to specific farm plots, with mixed or unverified supply chains effectively excluded. In fragmented smallholder systems, where beans are aggregated across multiple intermediaries, this creates operational complexity. Without verified geolocation data, shipments risk being rejected, regardless of underlying quality.

Legal compliance adds another layer of uncertainty. Much of cocoa production occurs under customary land tenure systems that lack formal documentation. While production may be legitimate in practice, the burden of proof under EUDR lies with exporters and importers. This may slow trade flows and increase due diligence costs.

Overall, EUDR implementation may tighten effective supply to the EU, even in a context of improved production, reinforcing the importance of traceability systems and coordinated policy responses across producing countries.

Financial Risk Management at Farm Level

The recent price correction highlights the importance of financial risk management at the producer level. The price environment of late 2024 created strong incentives to expand production and increase spending. However, the subsequent decline underscores the cyclical nature of commodity markets. Cocoa prices are influenced by weather, policy, and global demand conditions, and periods of elevated prices are rarely sustained over the long term.

For farmers, this introduces income volatility. In deregulated markets such as Nigeria, price movements are transmitted more quickly to the farmgate, increasing exposure to downside risk. Production decisions based on peak price expectations can therefore lead to financial strain when the market adjusts.

A more balanced approach can help manage these risks. Income diversification, including intercropping or complementary agricultural activities, can reduce reliance on cocoa alone. Maintaining savings buffers during high-price periods can also support liquidity when prices decline.

Cost discipline remains important. Investments in farm expansion or inputs should be aligned with medium-term price expectations rather than short-term peaks. Access to structured financing, including cooperative-based credit systems, may also improve resilience if appropriately managed. Farmers, cooperatives, and other value chain participants may also consider engaging specialized advisory support.

At Vestance, we work with stakeholders across the agricultural sector to design risk management strategies, improve financial planning, and navigate price volatility in commodity markets.