March ICE NY cocoa (CCH26) today is up +430 (+8.44%), and December ICE London cocoa #7 (CAZ25) is up +171 (+4.52%).

Cocoa prices are sharply higher today, posting 1-week highs.  Today's fall in the dollar index (DXY00) to a 1.5-week low has sparked short-covering in cocoa futures.

Shrinking ICE cocoa inventories are also supportive of cocoa prices.  ICE-monitored cocoa inventories held in US ports fell to an 8.5-month low of 1,709,185 bags on Wednesday.

An excessively short position by funds in London cocoa could exacerbate any short-covering rally.  Last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-short position in London cocoa futures by +3,737 to 22,748 net-short positions, the most in more than four years.

The outlook for ample global cocoa supplies has weighed on prices.  Last Wednesday, cocoa prices tumbled to 1.75-year nearest-future lows on expectations of a bumper cocoa crop in West Africa.  Reports from Ivory Coast cocoa farmers stated that cocoa trees are doing well, and recent dry weather helped harvested beans dry, while cocoa farmers in Ghana said favorable weather is allowing cocoa pods to develop quickly.  

Chocolate maker Mondelez recently said that the latest cocoa pod count in West Africa is 7% above the five-year average and "materially higher" than last year's crop.  The harvest of the Ivory Coast's main crop has just begun, and farmers are optimistic about its quality.

Cocoa prices are also under pressure after the European Parliament on Wednesday approved a 1-year delay to the deforestation law, keeping cocoa supplies ample.  The EU regulation, known as EUDR, aims to tackle deforestation in countries whose imports into the EU include key commodities such as soybeans and cocoa.  The delay of the EUDR will allow EU countries to continue importing agricultural products from regions in Africa, Indonesia, and South America where deforestation is occurring.

Cocoa prices were undercut after the Trump administration announced on November 14 that it dropped the 10% reciprocal tariffs on commodities not grown in the US, including cocoa, and also the 40% tariff on food imports from Brazil.  Brazil is among the world's top 10 cocoa-producing countries.

Reduced cocoa arrivals at ports in the Ivory Coast support cocoa prices.  Monday's government data showed that Ivory Coast farmers shipped 618,899 MT of cocoa to ports this new marketing year, from October 1 through November 23, down -3.7% from 642,500 MT in the same period a year ago.  The Ivory Coast is the world's largest cocoa producer.

Weak global cocoa demand is bearish for prices.  On October 30, the CEO of chocolate-maker Hershey said chocolate sales this Halloween season were "disappointing."  Halloween made up nearly 18% of annual US candy sales in 2024, second only to Christmas.  Meanwhile, the Cocoa Association of Asia on October 17 reported that Q3 Asia cocoa grindings fell by -17% y/y to 183,413, the smallest grindings for a Q3 in 9 years.  The European Cocoa Association on October 16 reported that Q3 European cocoa grindings fell -4.8% y/y to 337,353 MT, the lowest for a third quarter in 10 years.  The National Confectioners Association reported that Q3 North American cocoa grindings rose +3.2% y/y to 112,784 MT, but the addition of new reporting companies skewed the data.  In related news, North American sales volume of chocolate candy was down more than -21% in the 13 weeks ending September 7, compared to the same period last year, according to data from research firm Circana.

A supportive factor for cocoa is lower cocoa production in Nigeria, the world's fifth-largest cocoa producer.  Nigeria's Cocoa Association projects that Nigeria's 2025/26 cocoa production will fall by -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year.  In related news, Nigeria reported that its September cocoa exports were unchanged y/y at 14,511 MT.  

On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT, the largest deficit in over 60 years.  ICCO said 2023/24 cocoa production fell by -13.1% y/y to 4.380 MMT.  ICCO stated that the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.  For 2024/25, ICCO estimated a global cocoa surplus of 142,000 MT, marking the first surplus in four years.  ICCO also said global cocoa production in 2024/25 rose by +7.8% y/y to 4.84 MMT.
 

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