In a mid-December 2024 Barchart article on the cocoa futures market, I concluded:
Commodity cyclicality tells us the odds favor lower cocoa prices in 2025. However, a price correction depends on increased West African output, which depends on the weather and other factors in a region where political stability can be problematic. Expect high volatility in the cocoa market to continue over the coming months.
Nearby March ICE cocoa futures were at the $11,172 per metric ton level on December 13, 2024. In late January, prices were slightly lower and above the $11,300 level as cocoa prices consolidate in record territory.
Cocoa consolidates in early 2025
Nearby ICE cocoa prices were modestly higher from the 2024 closing level in early 2025.
The chart shows that the daily ICE March cocoa futures price moved 2.7% lower from the December 31, 2024, closing price of $11,675 per ton to $11,359 on January 15. Meanwhile, cocoa remains over double the pre-2024 record high of $5,104 per ton from 1977.
The supply problems remain a clear and present danger
West Africa is the leading cocoa-producing region, as its weather supports crops.
The chart shows that the Ivory Coast and Ghana produce the lion’s share of the world’s annual cocoa supplies.
Weather conditions and crop diseases have caused poor harvests, leading to the parabolic move in cocoa futures in 2024.
As the cocoa market enters 2025, supply issues continue to keep prices elevated above $10,000 per ton, which is a record pre-2024 price level.
Cyclicality depends on West African weather and political stability
Commodity markets experience price cyclicality over time. Prices tend to rise to levels where production increases, inventories grow, and consumers reduce purchases, leading to price tops. They often fall to levels where production declines, inventories drop, and consumers increase buying, leading to price bottoms.
The cocoa market presents a compelling case for a price top at double the pre-2024 record high. However, cyclicality will depend on the West African weather conditions, crop diseases, and political stability in 2025. The bottom line is that the current high prices will remain until production can increase and output satisfies the worldwide requirements.
Levels to watch in the cocoa futures market
The long-term cocoa chart highlights that the soft commodity became a parabolic shooting star in 2024.
The continuous cocoa futures chart dating back to 1959 shows that the first level of long-term support remains far below the current price at the 1977 $5,104 per ton level as the previous record high and technical resistance level has become technical support.
Meanwhile, another year of weather-related issues and crop diseases that interfere with global cocoa supplies makes the 2024 $12,931 peak the technical resistance level. In late January 2024, cocoa’s price remains far closer to the high than the 1977 peak and support level.
No ETFs or ETNs- Futures are the only route for participation
We should expect another year of extreme volatility in cocoa futures prices as the weather issues continue, and the potential for a corrective price plunge has increased with the price once output increases.
The only route for a risk position on the long or short side in cocoa is through the ICE futures arena, which offers futures and options on futures. The NIB ETN product ceased trading in June 2023, and no ETF or ETN products track cocoa prices.
Each ICE cocoa futures contract contains ten metric tons. At $11,359 per ton, the value is $113,590 per contract. Original and maintenance margin levels are $17,292 and $15,720, respectively. A market participant can control one cocoa contract on the long or short side with a 15.22% good faith deposit. Margin levels in cocoa increased significantly in 2024 because of the extreme price variance.
Cocoa is a critical ingredient in chocolate but is also required for flavoring, cosmetics, and energy drinks. Cocoa prices will likely remain highly volatile over the coming months as the market digests the current supply issues and West African production works to increase supplies.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.