Market Summary
Cocoa futures extended their remarkable rally this week, with the March 2025 ICE cocoa contract settling at $4,892 per metric ton, up 3.2% from the previous week. The ongoing supply deficit continues to be the primary driver of price action.
Key Price Movements
| Contract | Settlement | Weekly Change | YTD Change |
|---|---|---|---|
| Mar 2025 | $4,892 | +3.2% | +12.4% |
| May 2025 | $4,756 | +2.8% | +10.8% |
| Jul 2025 | $4,621 | +2.5% | +9.2% |
Supply Side Analysis
West African Production
The 2024/25 main crop in Ivory Coast and Ghana continues to underperform expectations:
- Ivory Coast: Cumulative arrivals down 18% year-over-year through mid-January
- Ghana: COCOBOD reports purchases 22% below the same period last season
- Weather concerns: Harmattan winds arriving earlier than usual, potentially affecting mid-crop development
Forward Curve Dynamics
The cocoa forward curve remains in steep backwardation, reflecting:
- Immediate physical tightness
- Limited certified stock availability
- Strong demand from grinding facilities
“The current backwardation structure suggests the market is pricing in continued supply stress through Q2 2025” — Trade Grounds Analysis
Demand Indicators
European Grinding Data
Q4 2024 European grinding figures showed surprising resilience:
- Total grindings: 348,456 tonnes
- Year-over-year change: -2.4%
- Better than the -5% decline many analysts expected
North American Processing
- Q4 grindings: 112,890 tonnes
- Despite high prices, chocolate manufacturers maintaining production levels
Technical Analysis
The March contract is trading well above key moving averages:
- 50-day MA: $4,456
- 200-day MA: $3,892
- RSI (14): 68 — approaching overbought territory
Support levels to watch:
- First support: $4,720 (previous week’s low)
- Major support: $4,500 (psychological level)
Outlook
Bullish Factors
- Persistent supply deficit
- Strong grinding demand
- Limited certified stocks
- Weather risks to mid-crop
Bearish Factors
- Overbought technical indicators
- Demand destruction risk at current prices
- Potential for managed money profit-taking
Trade Grounds View
We maintain a cautiously bullish outlook for cocoa in the near term. While the supply fundamentals remain supportive, the pace of the rally warrants attention to potential correction risks. Key levels to watch:
- Upside target: $5,100-5,200 range
- Downside risk: Correction to $4,500 remains possible if grinding data disappoints
This report is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.