Cocoa prices soared on the New York and London exchanges after the International Cocoa Organization (ICCO) slashed its estimate for the global surplus in the 2024/25 season. The revision hit ICE NY futures hardest, which jumped by 8.07%, while London contracts climbed 4.34%. The reason? Instead of the expected 142,000-ton surplus, the global market now faces just 49,000 tons. The organization also cut its production forecast to 4.698 million tons, down 150,000 tons from previous projections. This abrupt correction triggered a wave of short covering by hedge funds, which immediately pushed prices higher [1][2].
Why the Market Got It Wrong
The market was betting on a surplus. That was a mistake. The latest Commitment of Traders report shows hedge funds were holding 22,748 net short cocoa contracts—the largest short position in over four years. On Friday, a weaker dollar, with the index at its lowest in a week and a half, further fueled a rush to close short positions. For buyers outside the US, this was an opportunity since a weaker dollar makes cocoa cheaper [2].
Domino Effect on Exchanges and in Ports
US port inventories are shrinking fast. On Wednesday, December 6, ICE-monitored warehouses held just 1,709,185 bags of cocoa—the lowest level in 8.5 months. This is a clear sign that physical access to cocoa is limited, despite earlier forecasts of ample supply [2][4].
Just days ago, cocoa prices had hit their lowest point in nearly two years. Mondelez reported that West Africa’s pod count was 7% above the five-year average, and weather in Ivory Coast and Ghana was supporting record harvests. The optimism didn’t last. The ICCO revision quickly dampened the mood [1][2][3][4].
The 2024/25 season is set to be the first in four years with a surplus, though a modest one. The previous year ended with a global cocoa deficit of 489,000 tons—the largest shortfall in over sixty years. In December 2024, cocoa prices topped $12,000 per ton. Chocolate makers like Hershey had little choice: double-digit price hikes followed [5][6][7][8][9].