Multiple Forecast Cuts Signal Tightening Cocoa Market as Prices Surge Higher

The cocoa futures market is experiencing a decisive rally today, with March ICE NY cocoa futures climbing +128 points (+2.18%) and March ICE London cocoa rallying +130 points (+3.07%). This upward momentum reflects a fundamental shift in market expectations around global supply availability.

Estimate Maker Revisions Fuel Short Covering

The primary catalyst comes from Citigroup’s significant downward revision of its 2025/26 global cocoa surplus estimate. The investment bank slashed its projection to just 79,000 MT, down from a September estimate of 134,000 MT—a dramatic 41% reduction that signals deteriorating supply prospects ahead. This major estimate maker reassessment triggered aggressive short covering in cocoa futures as traders repositioned for a tighter market environment.

Citigroup is not alone in revising forecasts downward. Rabobank, another prominent estimate maker in commodity markets, cut its 2025/26 global cocoa surplus estimate to 250,000 MT from a November forecast of 328,000 MT on Tuesday. Earlier, the International Cocoa Organization (ICCO) on November 28 slashed its 2024/25 surplus estimate to just 49,000 MT from 142,000 MT while lowering global cocoa production to 4.69 MMT from 4.84 MMT. These coordinated downgrades from multiple estimate makers underscore the market’s confidence in supply tightening.

Physical Supply Constraints Provide Support

Beyond forecast revisions, the physical cocoa market shows genuine tightness. ICE-monitored cocoa inventories held in US ports have declined to a 9-month low of 1,655,457 bags as of Monday, providing tangible support beneath prices. Shrinking warehouse stocks historically precede price rallies as end-users scramble to secure available supplies.

A major upside catalyst emerges from NY cocoa’s inclusion in the Bloomberg Commodity Index (BCOM) effective January. Citigroup estimates that this index inclusion could trigger as much as $2 billion in passive buying flows during the first week of January from commodity funds mechanically tracking the BCOM, representing substantial technical buying pressure.

Supply Deficit Backdrop Reshapes Expectations

The market’s repricing reflects painful memories from the 2023/24 crop year, when ICCO reported a record global cocoa deficit of -494,000 MT—the largest in over 60 years. That shortage drove cocoa stocks-to-grindings ratios to a 46-year low of 27.0%, causing severe price dislocations. After experiencing the tightest supply environment in decades, traders are now cautious about any estimate maker’s forecasts suggesting ample supplies.

The recent shift toward surplus forecasts, even modest ones, comes as a relief compared to deficit scenarios. ICCO’s November projection for a 49,000 MT surplus in 2024/25 marked the first surplus in four years, with global production expected to rise +7.4% year-over-year to 4.69 MMT.

Countervailing Headwinds Remain Present

However, upward price momentum faces some resistance. Ivory Coast farmers shipped 895,544 MT of cocoa to ports through December 14 of the new marketing year, representing a +0.2% increase from 894,009 MT in the same period last year. As the world’s largest cocoa producer, Ivory Coast’s shipping volumes remain a key barometer for global supply.

Demand weakness has also constrained prices historically. Q3 Asia cocoa grindings fell -17% year-over-year to 183,413 MT—the smallest grindings for any third quarter in 9 years. European cocoa grindings dropped -4.8% year-over-year to 337,353 MT, marking the lowest Q3 reading in a decade. North American chocolate candy sales volume declined more than -21% in the 13 weeks ending September 7 compared to last year, signaling tepid consumer demand despite seasonal strength.

Nigeria, the world’s fifth-largest cocoa producer, projects a -11% year-over-year production decline to 305,000 MT for the 2025/26 crop, providing structural support for tight supply balances. Yet the combination of forecast downgrades from major estimate makers, declining physical stocks, and index inclusion mechanics appears to be overwhelming demand-side concerns, at least in the near term.