March 19, 2026 – Cocoa futures reversed early losses to trade higher as a weakening US dollar prompted traders to cover short positions. The market remains caught between conflicting signals of ample near-term supply and longer-term structural deficits.
Market Reversal on Currency Moves
March ICE New York cocoa futures turned positive after initial declines. The rebound was attributed primarily to dollar weakness, which makes dollar-denominated commodities like cocoa cheaper for holders of other currencies. This dynamic triggered a wave of short covering, where traders who had bet on lower prices bought back contracts to close their positions.
“Currency fluctuations are providing a temporary floor,” noted market analysts, highlighting the sensitivity of soft commodities to forex movements. The price action reflects a market balancing immediate policy developments against fundamental supply data.
Supply Pressures Ease Temporarily
A key bearish factor emerged from the European Parliament, which approved a one-year delay to the implementation of the EU Deforestation Regulation (EUDR). This regulation aims to curb imports of commodities linked to forest clearance. The postponement allows continued imports from regions in Africa, Indonesia, and South America, easing immediate concerns about supply constraints for European processors.
Expectations of a strong main crop in West Africa also weighed on sentiment. Reports from Ivory Coast indicated favorable drying conditions for harvested beans. In Ghana, farmers reported rapid pod development. Chocolate manufacturer Mondelez International stated that recent pod counts in West Africa were above the five-year average.
Underlying Supply Concerns Persist
Despite the delay in EU regulations and optimistic crop reports, underlying supply data points to tighter conditions. Government data from Ivory Coast, the world’s largest producer, showed cocoa arrivals at ports from October 1 through late November were down 3.7% year-over-year.
ICE-monitored cocoa inventories in US ports recently fell to an eight-month low. In Nigeria, the world’s fifth-largest producer, the Cocoa Association projected the 2025/26 crop would decline by 11% from the previous season.
Demand Picture Remains Weak
Global demand for cocoa continues to soften, acting as a counterbalance to supply concerns. The CEO of Hershey described recent Halloween chocolate sales as “disappointing,” a significant period for confectionery makers. Grinding data, a proxy for demand, showed weakness in key regions.
The Cocoa Association of Asia reported third-quarter 2025 grindings fell 17% year-over-year, hitting a nine-year low for the period. The European Cocoa Association reported a 4.8% annual decline for Q3, a ten-year low. While North American grindings showed a nominal increase, the data was skewed by new reporting companies, and retail sales volume for chocolate candy fell sharply in a recent 13-week period.
Long-Term Deficit vs. Short-Term Surplus
The International Cocoa Organization (ICCO) has provided a mixed long-term outlook. The organization revised the 2023/24 global cocoa deficit to 494,000 metric tons, the largest in over six decades. It reported production that year fell 13.1%, pushing the global stocks-to-grindings ratio to a 46-year low.
For the 2024/25 season, however, the ICCO estimated a global surplus of 142,000 metric tons—the first surplus in four years—with production expected to rise 7.8%. This projection of returning supply has capped significant price rallies despite the historical deficit.
Policy and Trade Developments
Trade policy has added another layer of complexity. In November 2025, the US administration removed a 10% reciprocal tariff on commodities not grown domestically, including cocoa, and a 40% tariff on food imports from Brazil, a top-ten cocoa producer. This move reduced a potential cost barrier for US importers.
The market now watches West African weather closely as the main harvest progresses. Analysts also monitor whether weak consumption data from major economies persists, which could further dampen prices despite any supply shocks. For real-time commodity data, traders often refer to sources like ICE Exchange or the International Cocoa Organization.
The immediate catalyst of dollar-driven short covering highlights cocoa’s volatility. Traders are weighing near-term surplus projections against a longer-term narrative of tight stocks and production challenges in key growing regions.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
