Jan. 27, 2026 - Cocoa’s brutal reversal and market reality

The global cocoa market has entered a brutal correction, with futures prices plunging 30% over the last month as speculative long positions collapsed following a disappointing index rebalancing. This downturn is exacerbated by weak demand, evidenced by an 8% drop in European Q4 grind and a 7% decline globally, signaling significant demand destruction through product reformulation and smaller portion sizes. In Ivory Coast, rumors of defaults on up to 200,000 tons of forward-sold cocoa and the potential insolvency of the CCC’s reserve fund raise the risk of a farmgate price cut by April. While Ecuador reports record export growth, the broader market is shifting from a record deficit toward a projected surplus of up to 400,000 tons by the 2025/2026 season. Managed money has flipped to a net short position, suggesting that any short-term rallies will likely face aggressive selling pressure.