Cocoa Prices Drop to 20-Month Low Amid Oversold Market Warnings

Cocoa Prices Plunge to 20-Month Low

Cocoa futures have experienced a sharp decline, hitting their lowest level in nearly two years. On Wednesday, U.S. cocoa futures for December delivery dropped 1.4%, trading around $6,090 per ton. This decline extended a broader sell-off that saw prices fall by 10% during the week ending October 3, 2025. This marks a significant reversal for cocoa, which had maintained elevated price levels over the past two years. The commodity reached a peak of $12,931 per ton in mid-December 2024 before the recent steep descent.

Factors Driving the Price Movement

Several factors contributed to the earlier price rally, including challenging agricultural conditions, pest infestations, and export controls implemented by major West African producers. However, the recent price drop correlates closely with policy changes in the Ivory Coast and Ghana, where governments increased the minimum prices paid to cocoa farmers.

Market Sentiment and Speculative Positioning

Investment banks have flagged the cocoa market as “extremely oversold.” Analysts at Citi highlighted that money managers have adopted “historically weak speculative positioning,” signaling weak momentum and an oversold condition for cocoa.

“Money managers turned net short this week,” said Societe Generale analysts. “Cocoa is extremely vulnerable to short covering, with short positions at their highest since August 2022.”

In London, cocoa contracts have reached extreme oversold levels, while New York contracts also face vulnerability, albeit to a lesser extent. This environment sets the stage for potential short covering, where investors buy back borrowed assets to close short positions, possibly triggering a price rebound.

Signs of Potential Recovery

J.P. Morgan strategists noted that despite the recent sharp price drop following the increase in farmgate prices, early indicators of recovery are emerging. Open interest in cocoa futures and options is rising from historic lows, approaching levels seen in February 2025. Back in February, U.S. cocoa futures intermittently traded above $10,000 per ton, underscoring the market’s capacity for significant volatility.

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FinOracleAI — Market View

The cocoa market is currently navigating a critical juncture characterized by an oversold technical state and recent policy shifts in key producing countries. While the downward momentum has been significant, the elevated short interest and rising open positions suggest a potential for short-covering rallies.

• Opportunities: Potential for price rebound driven by short covering and tightening supply fundamentals.
• Risks: Continued government interventions and global economic uncertainties may suppress demand and prolong the downtrend.
• Volatility: Elevated price swings expected due to speculative positioning and geopolitical factors in West Africa.
• Long-term outlook: Supply challenges and export controls may support prices once oversold conditions normalize.

Impact: The cocoa market’s extreme oversold status signals a near-term risk of volatility and potential price rebounds, warranting close monitoring by investors and industry stakeholders.