Cocoa Prices Retreat on Long Liquidation Pressure

Cocoa prices retreated on Tuesday as traders locked in profits following Monday’s sharp rally. A stronger US Dollar, which rose to a one-week high, triggered long liquidation across cocoa futures and added downward pressure to the market.

Supply Concerns from West Africa Offer Support

Despite the pullback, cocoa prices remain supported by tightening supply conditions in West Africa. The Ivory Coast—responsible for nearly 40% of global production—continues to see slower cocoa arrivals at its ports. Deliveries for the week ending December 28 totaled 59,708 MT, a steep 27% drop from the same period last year. Overall shipments since the start of the marketing year reached 1.029 MMT, slightly below last year’s 1.050 MMT.

Anticipation of index-related buying is also lifting sentiment. Cocoa futures will be added to the Bloomberg Commodity Index (BCOM) in January, and Citigroup estimates that the inclusion may attract up to $2 billion worth of investment into New York cocoa futures. Meanwhile, ICE-monitored inventories in the US have fallen to a 9.5-month low, reinforcing expectations of tighter near-term supply.

Cocoa prices have hovered near record highs in 2025 due to supply concerns in West Africa and market volatility, influencing global futures markets.

Favorable weather in West Africa has, however, softened some of the bullish pressure. Regular rainfall and sunshine in the Ivory Coast and Ghana have supported healthy pod development. Mondelez recently noted that the region’s cocoa pod count is 7% above the five-year average and significantly stronger than last year. With the main crop harvest underway, farmers remain optimistic about yield quality.

Global Market Outlook Remains Mixed

The long-term outlook for cocoa remains shaped by shifting production forecasts. The International Cocoa Organization (ICCO) recently cut its global 2024/25 surplus estimate to 49,000 MT, down from 142,000 MT, while also lowering its production outlook. Rabobank likewise trimmed its 2025/26 surplus projection, citing ongoing structural pressures.

However, demand challenges persist. Cocoa grindings in Asia dropped 17% year-on-year in Q3, marking the lowest level in nearly a decade. European grindings also declined, while North America showed only a modest increase influenced by new reporting participants.

Nigeria, the world’s fifth-largest cocoa producer, expects output to fall 11% in the 2025/26 season, adding another layer of supply uncertainty.

Overall, cocoa prices face a tug-of-war between tightening global supply, currency-driven volatility, and fluctuating demand across major consuming regions.

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