Cocoa Prices Rebound as Citigroup Cuts it Global Cocoa Surplus Estimate

March ICE NY cocoa advanced 2.18% (London +3.07%) as short covering followed Citigroup's cut to the 2025/26 global cocoa surplus to 79,000 MT (from 134,000 MT) and further tightening signals from ICCO and Rabobank; ICE-monitored US port inventories fell to 1,655,457 bags (a nine-month low). Support is bolstered by the planned inclusion of NY cocoa in the Bloomberg Commodity Index, which Citigroup says could attract up to ~$2 billion of passive buying in early January, but the rally is tempered by largely steady Ivory Coast arrivals (895,544 MT Oct.1–Dec.14, +0.2% y/y), strong West African pod counts and an EU EUDR delay that keep supplies available, alongside weak demand indicators such as declining Asian and European grindings and disappointing seasonal chocolate sales, leaving near-term direction contingent on the interplay between tighter supply signals and soft demand.

Analysis

March ICE New York cocoa rose +128 ticks (+2.18%) and March ICE London cocoa #7 gained +130 ticks (+3.07%) as short covering followed Citigroup’s reduction of the 2025/26 global cocoa surplus estimate to 79,000 MT from 134,000 MT and additional tightening signals from ICCO and Rabobank. ICE-monitored US port inventories fell to 1,655,457 bags, a nine-month low, providing additional technical support ahead of the Bloomberg Commodity Index inclusion of NY cocoa, which Citigroup estimates could attract up to $2 billion of passive buying in the first week of January. Supply-side data are mixed: Ivory Coast arrivals from Oct.1–Dec.14 rose to 895,544 MT (+0.2% y/y) and Mondelez reports a West Africa pod count 7% above the five-year average, while Nigeria’s production is projected to decline 11% y/y to 305,000 MT. Demand indicators are weak—Q3 Asia grindings fell 17% y/y to 183,413 MT and Q3 European grindings fell 4.8% y/y to 337,353 MT—so near-term price strength driven by positioning and inventory draws faces downside risk if grindings and arrivals confirm ample supply or if the EU EUDR delay keeps flows unrestricted.

Key Decisions for Investors

• Consider tactical, size-constrained long exposure to NY cocoa futures into year-end/early January to capture potential BCOM index-driven flows and short-covering, but limit position size and employ strict stop-losses given weak grindings and mixed arrivals
• Use options (buy calls or call spreads) to express upside participation tied to the anticipated ~$2 billion passive inflow while capping downside risk instead of taking outright leveraged futures exposure
• Monitor ICE-monitored inventory trends, Ivory Coast shipment cadence, ICCO/Rabobank surplus revisions and quarterly grindings data closely and reduce or hedge exposure if inventories rebound, shipments accelerate materially, or grindings deterioration persists