Cocoa prices have plunged to a 20-month low, halting a two-year rally driven by poor harvests and export limits in West Africa. The drop followed price hikes by Ivory Coast and Ghana, which raised the minimum farmgate price paid to cocoa farmers.
Investment bank Citi said in a Monday note that speculative traders are taking a “historically weak spec positioning” on cocoa, pointing to “weak momentum” and an “oversold signal” for the commodity. The data suggest investors are increasingly betting against cocoa after months of record prices.
Analysts at Societe Generale echoed that view, saying cocoa contracts traded in London had been “extremely oversold.” “Money managers turned net short this week,” the bank said, adding that short positioning “increased to the highest level since August 2022.”
The French lender warned that cocoa is “extremely vulnerable to short covering,” where investors rush to buy back borrowed assets to close out short positions. Such a move could trigger a short squeeze, sending prices sharply higher if sentiment shifts suddenly.
Societe Generale added that New York cocoa futures are also under pressure, though “not to the same extremes as London contracts.” Market volatility remains high as speculative traders unwind earlier bullish positions.
J.P. Morgan strategists noted that cocoa “sank sharply through the week after farmgate prices were raised,” calling it one of the sharpest weekly losses of the year. But they said “aggregate futures and options open interest across the cocoa market is rising off historic lows back to levels of February 2025.”
Back in February, U.S. cocoa futures briefly traded above $10,000 per ton, a record high. Analysts now warn that while prices have corrected sharply, the “extreme” sell-off may set the stage for another turbulent rebound in global cocoa markets.
