Cocoa Prices Rebound on Technical Short Covering

Cocoa futures jumped today—December ICE New York up 3.32% and London up 1.90%—after dollar weakness prompted short covering and ICE-monitored U.S. port inventories fell to an eight-month low (1,740,127 bags), providing near-term support. Underneath the move, fundamentals are mixed: EU’s one-year delay of its Deforestation Regulation, expectations of a larger West African crop (Mondelez pod count +7% vs. five‑year average) and ICCO’s forecasted 2024/25 surplus argue bearish, while weaker global demand (Q3 Asia grindings -17% y/y, Europe -4.8% y/y, disappointing U.S. Halloween sales), tariff removals and looming crop data (Ivory Coast exports down 5.7% y/y; Nigeria output seen -11% y/y) create continued volatility and a bifurcated outlook for prices.

Analysis

December ICE New York cocoa rose 164 ticks (+3.32%) and December London cocoa gained 72 ticks (+1.90%) as dollar weakness triggered short-covering after a sharp two-week selloff; ICE-monitored U.S. port inventories fell to an eight-month low of 1,740,127 bags, providing immediate technical support. The article notes prices had earlier hit 1.75-year lows after EU members sought a one-year delay to the EUDR, which temporarily eases supply restrictions and dampens near-term supply concerns.

Fundamentals are mixed: supply-side signals point both ways. Mondelez reports West Africa pod counts 7% above the five-year average and favorable weather in Ivory Coast and Ghana, and the ICCO projects a 2024/25 global cocoa surplus of 142,000 MT after a 7.8% y/y production rise, all bearish for prices. Offsetting this, recent data show Ivory Coast shipments down 5.7% year-on-year through Nov.16 and Nigeria projects an 11% drop in 2025/26 production; the 2023/24 season still recorded a -494,000 MT deficit and a 46-year low stocks-to-grindings ratio (27.0%), which supports near-term tightness.

Demand indicators are weak: Q3 Asia grindings fell 17% y/y to 183,413 MT, Europe grindings fell 4.8% y/y, and U.S. seasonal sales (Hershey commentary, Circana data) show softness. Given the confluence of inventory draws, policy/regulatory delays, crop reports and weak grindings, expect elevated volatility and data-dependent price direction in the coming months.

Key Decisions for Investors

• Short-term traders should consider opportunistic long exposure to the short-covering rally with tight stops given low U.S. port inventories and technical bounce,
• Medium-term investors should avoid adding large unhedged long positions because ICCO projects a 2024/25 surplus and West African pod counts suggest downside risk, consider reducing net long exposure or using hedges,
• Monitor near-term indicators closely—ICE U.S. port stocks, Ivory Coast shipment pace, West Africa pod counts, ICCO revisions, Asia/Europe grindings and dollar strength—and adjust positions if these data confirm a sustained supply or demand trend,
• Portfolio managers with cocoa exposure should consider option protection (puts or collars) to limit downside if crop and demand confirmations arrive, while short-term tactical positions can be sized smaller to reflect elevated volatility