Cocoa prices extend sharp decline, falling over 10% in early 2026

Cocoa prices have extended their dramatic decline, falling over 10% in the first twelve days of 2026 to trade near $5,443 per ton. The drop continues a historic sell-off from 2025, when prices plummeted by 48.1%, driven by shifting supply expectations and subdued demand from chocolate producers.

Improved Harvest Outlook Drives Selling Pressure

The recent decline is largely attributed to favorable weather in West Africa, which accounts for most of the world’s cocoa production. Expectations for improved harvests in Ivory Coast and Ghana during the upcoming February–March mid-crop have bolstered supply optimism. This follows earlier drought concerns that had initially driven prices to multi-decade highs. Analysts note that forecasts continue to be revised upward, reinforcing a bearish outlook for the market.

Weak Demand and Policy Shifts Add to Downturn

Demand remains weak, with European cocoa processing data expected to reflect sluggish consumption. Major chocolate producers had previously warned of softer sales amid high prices. Additionally, market sentiment was influenced by the White House's stated plans to remove cocoa tariffs, a move that added further downward pressure by easing potential import costs for U.S. buyers.

High Volatility and Technical Trading Amplify Moves

The market has experienced heightened volatility due to reduced liquidity and high margin requirements, exacerbating price swings. Rabobank analyst Oran van Dort noted that the sharp single-day drop on January 9 was driven more by technical selling and speculative positioning than by fundamental changes. While the overall trend remains downward due to surplus expectations, van Dort cautioned that current volatility means both further declines and short-term rebounds are possible in the near term.

Long-Term Bearish Outlook Amid Surplus Forecasts

Despite the potential for brief recoveries, the prevailing market view is bearish. Analysts do not foresee a return to previous record highs in the near future, as improved supply prospects and tempered demand are expected to keep prices under pressure throughout much of 2026. The focus now shifts to final harvest results from West Africa and whether consumption will recover in response to lower pricing.