Ivory Coast and Ghana Slash Cocoa Prices to Force Sales Amid Global Glut and Farmer Payments Crisis

The market for cocoa is being defined by a powerful supply surge that is pushing prices lower. On March 23, the benchmark price fell to $3,171.65 per tonne, marking a 2.56% drop from the prior day and reaching its lowest level since July 2023. This move is the direct result of a fundamental shift from scarcity to abundance.

The core of this story is a record inventory build. By March 18, ICE-certified cocoa inventories had climbed to a 7.5-month high of 2,307,127 bags. This accumulation is being driven by a combination of factors. First, favorable weather has boosted harvest prospects across West Africa, the world's primary producing region. Second, a forecast for a global surplus is now in place, with analysts predicting a surplus of around 308,000 metric tons for the 2025/26 season. That's a dramatic reversal from the 66,500-ton deficit expected for the current season.

Yet the inventory increase also reflects a cautious market. Dealers note that part of the rise still stems from cautious demand from the global industry, as processors and traders hold back amid weak demand. This dynamic creates a tension: ample physical supply is building, but the pace of consumption is not keeping up. The result is a market where the fundamentals are clearly pressured, setting the stage for continued price weakness unless demand picks up or the surplus forecast is revised.

The Demand Dilemma: Weak Recovery and Policy Interventions

The supply glut is accelerating because demand is not keeping pace. Slowing global consumption, driven by chocolate makers reformulating products to cope with high prices, is pushing key producers into crisis. This weak recovery is directly fueling the stockpile accumulation that is pressuring prices.

The situation is most acute in the two nations that produce half the world's cocoa. According to recent reports, producers in Ivory Coast and Ghana have struggled to sell beans and pay farmers this year due to ample global harvests and lower prices. The problem is structural: their fixed-price system, where regulators set a farmer price in October based on expected futures, now leaves them with a massive gap. When global futures plunged to around $3,100 per ton this year, traders who bought beans at the October price faced steep losses, so they largely stopped buying. The result is unsold cocoa piling up, with Ghanaian farmers said they had not been paid for their beans since November.

In response, both governments have slashed the fixed farmgate price earlier this month to try to boost sales. Earlier this month, both countries slashed the fixed farmgate price paid to cocoa farmers aiming at boosting sales after global prices fell. Ghana's regulator cut the price by nearly a third to around $3,580 per ton, while Ivory Coast also plans to lower its price by about a third. This policy intervention highlights the severity of the crisis, as the nations are essentially trying to force sales by offering beans at a discount to the international market.

The economic stakes are enormous. Cocoa accounts for nearly 40% of Ivory Coast's export revenue and nearly 15% of Ghana's, making it a critical source of foreign exchange. The current situation-where producers cannot sell beans at a profit and cannot pay farmers-threatens the stability of these economies. The weak demand that triggered this crisis is not a temporary blip; it stems from a shift in how chocolate is made, with makers using less cocoa to cut costs. Until that demand pattern shifts, the pressure on prices and the incentive for producers to sell at any cost will persist.

Structural Risks and Market Volatility

The market's current focus on a supply glut and weak demand overlooks persistent structural risks that could abruptly reverse the outlook. The long-term threat to West Africa's dominance is not just economic but biological and physical. Uncurable cocoa tree diseases, like the Cocoa Swollen Shoot Virus, continue to plague plantations, with sick trees taking years to replace and eroding future productive capacity. Compounding this, the presence of mining operations, particularly by Chinese companies searching for minerals, poses a direct threat to farmers and their land. Reports indicate these operations involve bullying farmers and threatening their lives, with the potential to burn down trees. Given that West Africa produces 70-80% of the world's cocoa, these are not minor disruptions but existential risks to the global supply chain.

This underlying vulnerability fuels the market's notorious volatility. Despite the clear surplus forecast, prices have shown extreme instability. After a sharp drop to a three-year low of $2,886 per metric tonne on 27 February, the market staged a swift rebound, with prices climbing back to around $3,349. This rapid correction from oversold levels underscores how quickly sentiment can flip. The volatility is not a new phenomenon; it has been a hallmark of the market following years of record highs driven by climate issues and supply chain problems. As one analyst notes, weather is volatile, and a single adverse event could tighten supply again, reigniting price spikes.

This persistent uncertainty is driving strategic hedging behavior among manufacturers. To protect against these swings, exporters and processors are turning to futures contracts to lock in prices and ensure more stable costs. This hedging activity is a clear signal that the industry does not view the current supply abundance as a permanent state. It reflects a pragmatic acceptance that the structural risks-disease, mining threats, and weather-remain, and that the market's direction is still highly uncertain. The bottom line is that while the immediate pressure is from a bumper crop, the long-term story is one of fragile supply, making volatility a constant companion for cocoa.

Catalysts and Watchpoints

The path from today's supply glut to a potential shortage hinges on a few critical watchpoints. The market has priced in a surplus, but the real test will be whether actual harvests and demand confirm or contradict that forecast.

First, the 2025-26 harvest volumes and quality from West Africa are the paramount signal. Early forecasts are mixed, with Ivory Coast's output forecast at 1.78 million metric tons. However, this figure must be monitored against the ground reality. The region's aging trees and persistent disease threats mean yields are fragile. Any deviation from these projections, especially a shortfall due to drought or disease, could rapidly tighten supply and reignite price volatility. The key period is the main harvest from October to January, when the first tangible data on crop size will emerge.

Second, global chocolate maker demand and inventory levels are the other major variable. The weak recovery in consumption that fueled the current crisis must be tracked for signs of a sustained rebound. If manufacturers begin to rebuild inventories, it would signal a shift in the demand equation and support prices. Conversely, continued weak demand would confirm the surplus and keep pressure on the market. This dynamic is central to whether the policy interventions in Ghana and Ivory Coast succeed in stimulating sales or merely deepen the glut.

Finally, watch for any major supply disruptions. The structural risks-disease outbreaks like Cocoa Swollen Shoot Virus and political or social instability linked to mining operations-are not going away. A significant outbreak or a spike in conflict could threaten plantations and disrupt logistics, creating a sudden supply shock. The market's volatility is a direct reflection of this underlying uncertainty. While the immediate story is one of abundance, these risks remain the potential catalyst for a sharp reversal. For now, the balance is delicate, and the coming months will reveal which side of the ledger holds sway.