Cocoa prices recover after sharp decline

Following a steep drop in prices over recent months, the cocoa market has shown some signs of recovery since early March. The rebound comes after a period in which the market clearly moved away from last year’s extreme tightness and shifted into a surplus-driven environment.Between January and the end of February, cocoa came under significant pressure. During this short period, prices were effectively halved. On the New York futures market, prices fell to below $3,000 per tonne, reaching their lowest level in over two years. This marks a clear transition from the deficit conditions of 2024 to the current surplus.The market bottomed out at the end of February. Since early March, the picture has shifted slightly. Prices recovered to around $3,400 per tonne last Monday. While the rebound is not particularly large in scale, it is notable given the downward trend earlier this year. Technical rebound, not a trend reversalThe recent uptick appears to be primarily technical in nature. After the sharp decline, many short positions had been built up, some of which were unwound following news of disruptions. For example, tensions around shipping routes and a weaker US dollar provided support to the market. Such factors can trigger quick upward movements, but they do little to change the underlying fundamentals.Fundamentals remain bearish Those underlying fundamentals have been clearly negative in recent months. Whereas the market was dominated by shortages a year ago, it is now expected to move into a substantial global surplus. For the 2025/26 season, the surplus is projected at approximately 365,000 tonnes.Production is recovering, particularly in West Africa. Improved weather conditions are supporting harvests, while countries such as Ecuador continue to expand output. The high prices of recent years have stimulated investment, which is now beginning to translate into higher production volumes.Demand lags and stocks build At the same time, demand remains weak. Lower prices have not yet resulted in a clear increase in consumption. This is reflected in rising stock levels, particularly in Ghana and Côte d’Ivoire. This stands in stark contrast to last year, when the market was characterised by immediate tightness and minimal inventories.The price decline earlier this year has left a significant impact. Governments in West Africa were forced to intervene to stabilise markets, while traders are facing financing difficulties. The sharp fall in prices in recent months has also cooled cocoa enthusiasm in Brazil, leading to the cancellation of investment plans. Brazilian cocoa producers told Reuters that half of the planned new plantings will not go ahead. In northern Brazil, trading house Czarnikow had identified plans to expand cultivation by 75,000 hectares—equivalent to around 5% of total global production.