Cocoa Prices Plummet from Record Highs Amid Fading Demand and Easing Supply Fears
After soaring to unprecedented record highs in late 2024 and early 2025, global cocoa prices have experienced a dramatic and sustained decline, driven by a confluence of weakening consumer demand, more optimistic supply forecasts, and a significant shift in market sentiment. This downturn is offering some relief to chocolate manufacturers, but prices remain considerably elevated compared to historical averages.
The Bitter Truth: Demand Destruction Takes Hold
The most significant factor behind the recent price plunge is the sharp drop in global demand for chocolate and cocoa products. The astronomical prices seen over the past year forced manufacturers to pass on increased costs to consumers, leading to sticker shock and subsequent "demand destruction." Consumers are simply buying less chocolate or opting for cheaper alternatives.
Key indicators of demand, cocoa grinding volumes, have shown steep declines across major processing regions:
Europe, the world's largest cocoa processor, saw its grindings plummet by 7.2% year-on-year in Q2 2025, marking the steepest decline in two decades.
Asian grind volumes also experienced a significant contraction, falling by 16.3% compared to the same period in 2024.
The Malaysian Cocoa Board reported a substantial 22% year-on-year drop in cocoa bean processing for Q2 2025.
Major chocolate industry players, including Barry Callebaut AG and Mondelez International, have publicly acknowledged the impact. Barry Callebaut revised its sales volume guidance downwards multiple times, citing "unprecedented volatility" and experiencing its "largest decline in a decade" in the third quarter. Mondelez International reported weaker-than-expected sales, attributing it to consumers cutting back on snack purchases amidst economic uncertainty and soaring chocolate prices.
In response, manufacturers have resorted to "shrinkflation" – reducing product size while maintaining price – and "skimpflation" – lowering cocoa content or substituting with other ingredients like vegetable oils. While these tactics aim to preserve profitability, they ultimately signal a reduced appetite for pure cocoa.
A Glimmer of Hope: Improving Supply Prospects
After three consecutive years of global cocoa deficits, the International Cocoa Organization (ICCO) has offered a cautious glimmer of hope, forecasting a small global cocoa surplus of 142,000 metric tons for the 2024/25 season. This prospect, if it materializes, is helping to alleviate some of the acute supply fears that had propelled prices to record levels.
Reports of favorable weather conditions in key West African growing regions, particularly Ivory Coast and Ghana, have contributed to a more positive outlook for the upcoming harvest, though challenges persist in Nigeria and Cameroon. Furthermore, an increase in ICE-monitored cocoa inventories held in US ports, reaching a 7-3/4 month high, has triggered some liquidation of "long" positions by speculators, exacerbating the price decline. Higher cocoa supplies projected from Ghana are also seen as a bearish factor for the market.
Lingering Headwinds: Quality and Logistics
Despite the improving supply outlook, not all news is sweet. There are persistent quality concerns regarding Ivory Coast's mid-crop cocoa, with processors reporting 5% to 6% of cocoa in each truckload being of poor quality, significantly higher than the typical 1% during the main crop. This issue is partly linked to late-arriving rains affecting crop development.
Additionally, even with a projected production rebound of 7.8% for 2024/25, ongoing logistical constraints continue to hinder efficient delivery, indirectly suppressing demand.
Speculative Influence and Volatility
The market's dramatic swings have also been amplified by speculative trading. After extensive speculative activity fueled the price surge, there has been a halving of net long positions in London cocoa since the start of the year. This liquidation by speculators betting on rising prices has exerted significant downward pressure on nearer-term contracts. The resulting reduction in market liquidity has also contributed to heightened volatility, making prices more susceptible to sharp movements.
The Long-Term Outlook: Still Elevated
While cocoa prices have seen a sharp downturn in early to mid-2025, falling from highs exceeding $12,000 per tonne to the $7,500 - $9,000 per tonne range, they remain significantly above historical averages. Experts caution that while a modest recovery in production is anticipated, it may not be sufficient to fully replenish global inventories depleted by three years of deficit.
Structural issues such as chronic underinvestment in cocoa farms, aging trees, and persistent climate variability in major producing regions of West Africa suggest that prices are likely to remain volatile and potentially at a structurally higher level than pre-2024 norms for the foreseeable future. The market will closely monitor upcoming quarterly grinding reports and weather patterns in key growing regions to gauge future supply and demand dynamics.
