Cocoa: Demand Hope Meets Supply Reality

Key Takeaways

• Malaysia Q1 grindings up 8.7% YoY, first regional demand boost
• Ivorian cocoa exporters doubled April forward sales, signaling hedging pressure
• Global cocoa surplus estimate raised; ICE stocks hit 19.75‑month high
• Managed money net short at three‑year high, amplifying volatility risk

Pulse Analysis

Malaysia’s first‑quarter grindings surge provides the most compelling demand signal in a market dominated by surplus. An 8.7% year‑on‑year increase marks the first positive regional reading of the reporting cycle, nudging cocoa prices upward as a softer dollar adds a modest floor. Yet the broader backdrop remains bearish: the International Cocoa Organization lifted its 2024/25 surplus forecast, and ICE‑registered stocks sit near a 20‑month peak, underscoring that the market’s fundamentals have not fundamentally shifted.

The risk profile is further complicated by record short positioning among managed money. According to the latest CFTC data, net short exposure in New York cocoa is the highest in over three years, creating a volatile environment where any confirmation of broader demand—especially from pending European, Asian, and North American grindings—could trigger sharp price moves. Shipping cost pressures from Strait of Hormuz tensions and a weakening U.S. dollar provide a modest price floor, but they are insufficient to overturn the prevailing surplus narrative.

Technically, cocoa has breached its 20‑period moving average for the first time since January, offering a tentative near‑term bullish signal. However, the 50‑period average remains in steep decline, framing the rally as a counter‑trend bounce within a bearish regime. Resistance clusters between $3,900 and $4,000, while a break below $3,031 would invalidate the March recovery case. Market participants should watch upcoming grindings data and short‑covering dynamics to assess whether the price can sustain a breakout or revert to its longer‑term downtrend.