Cocoa Rally Signals Supply Crunch Ahead—Here's What You Need to Know

Cocoa just staged a sharp comeback. December NY futures jumped +165 points (+3.34%) and London cocoa climbed +83 (+2.19%) on Thursday, bouncing hard off oversold levels after a brutal two-week selloff. The culprit? A weakening dollar triggered aggressive short covering—classic risk-on behavior.

But here’s the interesting part: the fundamentals are actually tightening.

The Supply Story

ICE cocoa inventories in US ports just hit an 8-month low of 1.74M bags. More importantly, Ivory Coast—the world’s cocoa powerhouse—shipped only 516,787 MT from October-November, down 5.7% YoY. Nigeria, the 5th-largest producer, is expected to see production drop 11% YoY to 305,000 MT in 2025/26.

This matters because the market had a massive deficit in 2023/24: -494,000 MT, the largest in 60+ years. Global stocks-to-grindings ratios hit a 46-year low of 27.0%. While 2024/25 is projected to swing into a small surplus (+142,000 MT), the underlying tightness hasn’t disappeared.

Why Prices Are Still Under Pressure

Despite tight supplies, several headwinds persist:

Demand weakness: Q3 Asia cocoa grindings collapsed 17% YoY (smallest in 9 years). Europe fell 4.8% to a 10-year Q3 low. North American chocolate sales tanked 21% in the 13 weeks through September.

Supply surge from Africa: Ivory Coast farmers report cocoa trees are thriving. Mondelez data shows West Africa’s pod count is 7% above the 5-year average—pointing to a bumper crop.

Policy pivot: The Trump administration dropped reciprocal tariffs on commodities not grown in the US (including cocoa), removing a price-support narrative.

EUDR delay: The EU’s Deforestation Regulation got pushed back 1 year, easing supply concerns and removing the artificial bullish backdrop from stricter trade rules.

The Takeaway

Thursday’s rally felt good, but it’s a short-covering bounce on a weakening dollar—not a fundamental turnaround. You’ve got a classic tug-of-war: structural supply tightness vs. demand slowdown and record African harvests. Until we see evidence of demand stabilizing or African crop disruptions, expect volatile, rangebound action.