Cocoa grinding will increase this season thanks to ample bean supplies, but the fastest growth will be seen in producing countries, with demand in traditional processing centres remaining stagnant the ICCO said.
In its first forecast for global cocoa supply and demand in 2016-17, the ICCO saw the market "bracing itself for a significant supply surplus".
"Compared with the previous season, this reflects an increase in world production of almost 15%, to 4.552m tonnes.
With grindings up only 3% year-on-year, a 264,000 production deficit was forecast, somewhat higher than most analysts are expecting, with a survey of expectations earlier last week forecasting about 250,000 tonnes.
If realized, the ICCO figures would grow cocoa stocks to a hefty 1.67m tonnes, or nearly 40% grindings.
But the ICCO lifted its ideas of the 2015-16 supply deficit, to 196,000 tonnes, compared to earlier estimates of 150,000 tonnes.
Demand is seen rising in reaction to falling prices.
"The outlook for processing activity during the current season seems more favourable than during the two previous seasons," the ICCO said.
The ICCO forecast world cocoa grindings to rise by nearly 3% to 4.242m tonnes in 2016-17, but the trend was sharply divergent, with grindings in cocoa producing areas booming, while those in cocoa importing countries remaining fairly flat.
African cocoa grinding is seen booming by some 8%, to 830,000 tonnes, while Asian grinding is seen up by nearly 5%, to 919,000 tonnes.
But grinding in Europe and the Americas is seen largely unchanged, at 1.60m tonnes and in the Americas (at 890,000 tonnes).
"If the current fall in international cocoa bean prices is sustained in the coming months, the price of finished cocoa and chocolate products are expected to decline, thereby supporting consumption," the ICCO said.
"However, it may take time for the reduction in the cost of the cocoa beans to be passed on to consumers," the committee said.
"In terms of its share of total world production, Africa is expected to remain by far the largest cocoa-producing region, accounting for 74% of world cocoa output in 2016-2017," the ICCO said.
"For the current season, favourable weather conditions have helped crops across the main cocoa-growing countries within the West African region, representing a change from the previous year when strong, dusty harmattan winds from the Sahara devastated cocoa production, in addition to the impact of El Nino."
Cocoa output in Côte d'Ivoire is forecast at 1.90m tonnes in 2016-2017, up some 320,000 tonnes year on year.
The ICCO forecast total output for Ghana to reach around 850,000 tonnes in 2016-2017.
And cocoa production in Indonesia, the third-ranked cocoa grower, was also seen rising to an estimated 330,000 tonnes.
But the ICCO said that "mixed weather patterns continue to persist which could adversely affect the current season's production," driving higher imports to meet local grinding demand, seen at 400,000 tonnes.
By William Clarke