Sweetness’ gone out of chocolates

Cocoa prices. chocolate demand down; but are bullish trends ahead?

Over the past few months, cocoa prices are down, as is the demand for chocolates, and chocolate-laced candies. Despite the geopolitical trends, and trade disruptions, cocoa supplies are high, even as chocolate makers, the main users of the raw material, clock lower revenues because of the customers’ aversion for the sweets. However, drought conditions in major producer nations like Ghana and Ivory Coast, as well as the winding down of short positions may curtail cocoa supplies, and boost prices in the future. But only if chocolate demand picks up, and user firms are willing to hike their offtakes.

According to media reports, cocoa prices, which peaked at $12,000 per tonne by the end of 2024, are down in the dumps. By early 2026, the prices of the futures had slumped to $3,000, or a depressing fall by 75 per cent. One of the reports explains that “it would be easy to frame the episode as (a typical) boom and bust. But that misses what has changed underneath.” Suddenly, within a year or so, supplies recovered, even as demand by the chocolate makers faltered. The prices, which expanded due to demand and supply conditions, were now squeezed.

Industry figures indicate that the sales of cocoa grindings in the first quarter of this calendar year (2026) fell by nearly four per cent in North America, and the decline in Europe was nearly eight per cent, or higher than the expected six per cent. Asia offered some form of a relief, where the first quarter’s demand boomed by more than five per cent, amidst a prediction of a nearly seven per cent decline. However, in volume terms, Asia’s quarterly demand of over 2,00,000 tonnes was nearly half of the combined America-Europe sales of over 4,00,000 tonnes.

One of the reasons for the overall reduced offtake was the bearish demand for chocolates. In the 13 weeks ending March 22, 2026, the sales of chocolate candy in North America were down by more than one per cent. During the past Easter holiday, when candy sales boom, the consumption was down by an unexpected five per cent. Easter came in early April this year, and bang in the middle of the ongoing Iran war. Higher prices of goods, apart from inflation expectations, may have curtailed the festive excitement. But the downturn was an ongoing one.

Thanks to the high prices in 2024, and 2025, chocolate makers hiked prices, and looked for alternatives to cocoa. This forced the consumers to go slow on the candy-eating habits. The trends continued, even as cocoa prices slumped. Despite the fall in cocoa prices, Barry Callebaut, a leading chocolate maker, warned that its “recurring operating profit” for the year ending August 2026 would decline by a “figure in the mid-teens percentage range.” Its shares plunged by 16 per cent on the day of the announcement, but remained 44 per cent higher than a year ago.

According to a last year’s report by JP Morgan, “The global chocolate market has seen a decline in volumes as prices increase, with private labels gaining market share among price-sensitive consumers, while the premium segment continues to expand. Some of the volume weakness for some players was attributable to temporary factors, but we also see this as reflective of higher elastic pressures in the chocolate market that may build with still higher pricing in the second half of the year.” It added that the chocolate industry was set to hike prices by the teens this year and, hence, volumes will remain pressured.

On the cocoa supply side, there are several factors that impacted the prices over the past few months. Based on the high prices, grower nations like the Ivory Coast upped the supplies. Nigeria, the fifth-largest cocoa producer, exported huge quantities, and its overseas supplies grew by 17 per cent in 2025.

In March, the global cocoa surplus estimates were hiked by nearly 50 per cent to 75,000 tonnes, up from 49,000 tonnes in November 2025, “which was the first surplus in four years.” Overall

production grew by more than eight per cent, and neared five million tonnes. The surplus may continue.

Although one is not sure of how speculation, and futures trading will impact the cocoa prices, there are no doubts that the existing short positions will play a vital role. As cocoa prices continue to fall rapidly, several funds boosted their short positions in expectations of even-lower prices. In the week ending April 7, 2026, the short positions were the highest in the past three years. If cocoa prices fall, the positions will increase. But if prices recover, the unwinding may give a further boost. In both cases, the trends will accelerate, and deepen.

However, the chances of a recovery in cocoa prices and, hence, the impact on the short positions, will be decided by the future produce. According to media reports, “Recent rainfall in West Africa has been insufficient to ease drought concerns in the Ivory Coast and Ghana.” An agency reported that they “blanket more than half of the Ivory Coast, and about two-thirds of Ghana.” Together, the two nations account for more than half of the world’s cocoa. Ivory Coast’s production is likely to fall by nearly 11 per cent in 2025-26 and, in February 2026, Rabobank cut the nation’s surplus estimate by almost a quarter.

Both Ghana and Ivory Coast have decided to cut the official price they pay to the cocoa farmers despite the drought situation, lower production in the future, and the chances of global price recovery. Reports indicate that Ghana cut the official price by nearly 30 per cent last month, for supplies for the 2025-26 growing season. Ivory Coast may resort to a higher cut, almost 60 per cent, for the mid-crop harvest that started in April 2026. Obviously, the price cuts to farmers are goaded by the 75 per cent drop in global prices over the past few months.

In addition to the farm-related implications, as well as the sales of chocolates, the Iran-Israel-US war will play a major, though temporary, role. If the Strait of Hormuz remains open, supplies will enhance, and depress cocoa prices. If the choke point remains choked, as Iran threatens more disruptions, it will have an opposite effect. The grower nations, chocolate makers, traders, and speculators will need to deal with the fast-changing scenario. The worst hit may be the farmers, whose incomes will dip in the midst of a drought.