Cocoa’s Rebound Still Sits Inside a Bear Market
Shipping friction and short-covering have lifted prices, but surplus expectations and weak grind demand still define the bigger picture
ICE May Cocoa futures rallied nearly 12 percent this week, climbing from $2,888 to $3,230 per tonne after briefly hovering near multi-year lows. The move is one of the sharpest weekly recoveries in months and follows an extended liquidation phase that erased much of the extraordinary rally seen earlier in the cycle.
At first glance the bounce suggests stabilisation. But the underlying drivers tell a different story. The surge has been fuelled less by a tightening balance sheet and more by market mechanics: short-covering, logistical disruptions, and temporary friction in physical flows.
The broader cocoa narrative remains anchored in a rebuilding supply picture and weakening demand signals. Prices may have jumped, yet the market is still grappling with the transition from scarcity to surplus.
The Market Is Trading Friction, Not Scarcity
Recent price action has been shaped by disruptions along the trade routes rather than structural supply shortages.
Freight costs have climbed amid geopolitical tension affecting key maritime corridors, increasing insurance and fuel costs for shipments moving out of West Africa. At the same time, Ivory Coast port arrivals have slowed modestly. Deliveries since the start of the marketing year reached around 1.34 million tonnes by early March, roughly 3.6 percent below last year.
In a market heavily shorted by speculative traders, these logistical uncertainties have been enough to spark aggressive short-covering. When positioning becomes crowded, relatively small physical disruptions can trigger rapid price reactions.
But this dynamic says more about market structure than underlying fundamentals. Once logistics normalise, the focus is likely to return to the growing supply cushion.
Inventories Are Quietly Rebuilding
Behind the volatility, the global balance sheet is gradually loosening.
The International Cocoa Organization expects the first global cocoa surplus in four years, with production projected to expand sharply. Global output is forecast to rise roughly 8 percent year on year to about 4.7 million tonnes.
Industry projections extend the surplus narrative further. StoneX estimates the market could move into a surplus of nearly 287,000 tonnes in 2025/26, followed by another surplus of roughly 267,000 tonnes the following season.
Stocks are already responding. Global inventories have increased about 4 percent year on year to approximately 1.1 million tonnes. Exchange warehouses are also filling. ICE certified stocks have climbed to around 2.2 million bags, a six-and-a-half month high.
For traders, these numbers matter because inventories act as the market’s shock absorber. As stocks rebuild, the system becomes more resilient to temporary disruptions.
Demand Is Showing Signs of Fatigue
While supply expands, consumption is losing momentum.
Chocolate manufacturers are confronting the lingering effects of last year’s price spike. Higher retail prices are filtering through to consumers, and grind data across key processing regions reflects that strain.
European cocoa grindings dropped 8.3 percent year on year in the fourth quarter to roughly 304,000 tonnes, the weakest level for that period in more than a decade. Asian grindings declined nearly 5 percent, while North American processing volumes were essentially flat.
Corporate data reinforces the slowdown. Barry Callebaut reported a 22 percent decline in cocoa division sales volumes during its latest quarter, illustrating how sharply demand has responded to elevated prices.
Demand rarely collapses overnight in agricultural markets. Instead it fades gradually, leaving prices vulnerable if supply simultaneously improves.
The Technical Line in the Sand
Despite the sharp rally, the chart still reflects a market firmly in corrective territory.
Cocoa futures continue to trade far below their major moving averages. The 50-day average sits near $4,440 while the 200-day line remains even higher around $6,263. With prices near $3,230, the contract is still deep beneath both indicators.
The immediate technical battleground sits near $3,250. A sustained break above this level would open a test toward $3,440, the next resistance zone. On the downside, support is clustered around $3,030, with a deeper floor near $2,850.
For now the rebound resembles a pressure release rather than a structural reversal.
Which leaves the market facing an uncomfortable tension. Logistics disruptions and positioning have delivered a powerful rally, yet inventories are rebuilding and demand remains fragile.
The key question is whether this surge marks the beginning of stabilisation, or simply a pause before the surplus narrative regains control.
In our latest deep dive cocoa report, we examine:
Global Stock Rebuilding
How rising exchange inventories and expanding global production are gradually reshaping the cocoa balance sheet.
Demand Fatigue in Key Consuming Regions
Why declining grind volumes in Europe and Asia suggest that high prices are beginning to suppress consumption.
Key Technical Levels
The $3,030 support zone that defines the current floor and the $3,250 to $3,440 resistance band that must be cleared before any broader recovery can take hold.