Cocoa Prices Climb on Supply Constraints and Short Covering—But Headwinds Persist

Cocoa futures experienced a notable surge on Tuesday as deteriorating shipping flows to ports in the Ivory Coast triggered short covering in the market. The prices continued their climb into a second consecutive day of gains, with March ICE NY cocoa advancing +90 points (+2.14%) and March ICE London cocoa #7 rising +91 points (+3.04%). Behind this price recovery lies a complex interplay of supply constraints, structural demand weakness, and shifting market positions that paint a nuanced picture for cocoa traders.

Short Covering Drives the Rally as Ivory Coast Shipments Decelerate

The immediate catalyst for cocoa’s climb stems from slowing delivery rates at Ivory Coast ports during the current marketing year. As of Monday’s cumulative data, Ivory Coast farmers delivered just 1.23 million metric tons (MMT) to ports from October 1, 2025, through February 1, 2026—representing a 4.7% decline compared to 1.24 MMT in the equivalent period of the previous year. Since the Ivory Coast accounts for roughly one-third of global cocoa supply, this deceleration has prompted traders holding short positions to cover, creating upward price pressure. The correction arrived after New York cocoa hit a 2.25-year low and London cocoa touched a 2.5-year low just last Friday, when global oversupply concerns had dominated sentiment.

Global Demand Struggles Against Abundant Supplies

Despite cocoa’s price climb this week, the underlying demand structure remains deeply challenged. Consumer resistance to elevated chocolate prices continues to weigh on volumes across major producing regions. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, reported a sharp 22% decline in cocoa division sales volume for the quarter ending November 30, citing “negative market demand and a prioritization of volume toward higher-return segments.” This demand deterioration shows up clearly in grinding reports from key regions: European cocoa grindings fell 8.3% year-over-year in Q4 to 304,470 MT (well below the 2.9% decline expected), marking the lowest Q4 in twelve years. Asian cocoa grindings contracted 4.8% year-over-year to 197,022 MT, while North American grindings edged up a meager 0.3% to 103,117 MT. These weak consumption figures reflect the fundamental challenge facing the cocoa market: prices must recede significantly to reignite demand among manufacturers and consumers.

Forecasters project persistent surplus conditions ahead. StoneX predicts a 287,000 MT global cocoa surplus for the 2025/26 season, while Rabobank recently slashed its 2025/26 surplus estimate to 250,000 MT from a prior 328,000 MT forecast. The International Cocoa Organization (ICCO) reported on January 23 that global cocoa stocks climbed 4.2% year-over-year to 1.1 MMT, underscoring ample inventory levels worldwide.

Market Structure Shifts: Inventory Rebound and Harvest Optimism

Even as cocoa prices climb this session, inventory dynamics present a mixed signal for the market’s structural health. Since reaching a 10.5-month low of 1,626,105 bags on December 26, ICE-monitored cocoa inventories held at U.S. ports have rebounded substantially to a 2.5-month high of 1,782,921 bags as of Tuesday. This inventory accumulation, while indicating weak physical demand, acts as a bearish longer-term price factor.

Offsetting inventory concerns are favorable growing conditions in West Africa. Tropical General Investments Group noted that ideal agricultural conditions are expected to boost February-March cocoa harvests in both the Ivory Coast and Ghana, with farmers reporting notably larger and healthier pods compared to last year’s crop. Mondelez reported that the latest pod count in West Africa stands 7% above the five-year average and “materially higher” than last year’s production. The Ivory Coast’s main crop harvest has begun, and farmers express optimism regarding quality prospects.

Supply Outlook Tightens—A Year of Reversals

Beyond the immediate week’s price action, the longer-term supply picture has undergone dramatic revision. Nigeria, the world’s fifth-largest cocoa producer, represents a bright spot for price support: November cocoa exports from Nigeria fell 7% year-over-year to 35,203 MT, and the Nigeria Cocoa Association projects that 2025/26 production will plunge 11% to 305,000 MT from a prior projection of 344,000 MT for 2024/25. This supply tightness from Nigeria provides a counterbalance to West African abundance.

The year 2023/24 marked an inflection point in global cocoa markets. On May 30, ICCO revised its 2023/24 deficit estimate to a staggering -494,000 MT—the largest deficit recorded in over sixty years—as global production collapsed 12.9% to 4.368 MMT. That severe shortage drove prices to extraordinary levels and forced demand destruction. By contrast, ICCO’s December 19 estimate pegged the 2024/25 season at a modest 49,000 MT surplus—marking the first surplus in four years as global production rebounded 7.4% to 4.69 MMT. This recovery in supply availability explains the fundamental downward pressure on prices, even as short-term tactical factors allow cocoa to climb in individual trading sessions. The climb reflects trader positioning rather than a reversal of underlying supply abundance, suggesting that any sustained price recovery would likely meet renewed selling as the market works toward price discovery in a structurally surplus environment.