Cocoa Futures Prices Surge on Index Rebalancing Wave

Thursday’s Rally in Full Swing

Cocoa futures prices staged a impressive comeback on Thursday, with March ICE NY cocoa jumping +162 points (+2.74%) and March ICE London cocoa climbing +109 points (+2.56%). The move erased Wednesday’s losses and marked a 1-week high, driven primarily by expectations of significant commodity index rebalancing activity.

The Index Buying Catalyst

Here’s the key catalyst: Peak Trading Research estimates that upcoming commodity index rebalancing could trigger purchases of approximately 37,000 cocoa futures contracts—that’s roughly 31% of total open interest. To put it in perspective, the addition of cocoa futures to the Bloomberg Commodity Index alone could draw as much as $2 billion in buying pressure according to Citigroup’s analysis.

Supply Squeeze Playing Out

On the supply side, the picture is tightening. Ivory Coast shipments this marketing year (Oct 1-Jan 4) totaled 1.073 MMT, down 3.3% year-over-year from 1.11 MMT. The International Cocoa Organization just cut its 2024/25 global production estimate to 4.69 MMT from 4.84 MMT, while slashing the surplus projection to just 49,000 MT from 142,000 MT. Meanwhile, Nigeria—the world’s fifth-largest producer—is projected to see production drop 11% to 305,000 MT.

The Demand Headwind

Not everything is bullish. Q3 Asian cocoa grindings fell 17% year-over-year to just 183,413 MT (weakest Q3 in 9 years), while European grindings dropped 4.8% to 337,353 MT. Weak global demand remains a drag on cocoa futures prices, even as supply tightens.

What Changed Wednesday?

Wednesday’s decline came on the back of favorable West African growing conditions. Tropical General Investments reported larger, healthier pods in Ivory Coast and Ghana, with Mondelez noting pod counts 7% above the 5-year average. These abundant harvest prospects had pressured cocoa futures prices temporarily.

Inventory Check

ICE-monitored cocoa inventories at US ports recovered to 1,658,056 bags on Thursday after hitting a 9.75-month low of 1,626,105 bags on December 26—a modest positive for inventory watchers tracking supply tightness.