I asked if cocoa futures prices were running out of upside steam in a January 28, 2025, Barchart article. I wrote:
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.
Nearby cocoa futures were trading at the $11,835 per ton level on January 27, 2025. The soft commodity has made lower lows since the December 2024 record high.
Cocoa’s price turned lower
The continuous cocoa futures chart reached a record $12,931 per ton high in December 2024 when it ran out of upside steam.
The monthly chart highlights cocoa’s decline, which reached $7,770 per ton in March 2025. At around $8,200, on March 17 May cocoa futures are near the recent low and remain in a bearish trend.
Technical support is at the 1977 high
Meanwhile, cocoa’s record high before 2024’s explosive rally was at $5,104 per ton in 1977.
The quarterly chart shows that cocoa remained below the 1977 high until 2024, when the price more than doubled. As cocoa futures have turned lower from the late 2024 record peak, the previous technical resistance level at $5,104 has become the long-term technical support level.
Trade barriers in cocoa could impact prices
Cocoa’s explosive month resulted from weather and crop issues in West Africa, the region that produces the lion’s share of global cocoa supplies. As with all commodities, the cure for high prices is those high prices, so we should expect a significant effort to increase the future cocoa crops to relieve the price pressure. Moreover, with cocoa trading at over $8,000 per ton, it behooves cocoa producers to increase output in the current environment.
Meanwhile, the U.S. Trump administration has announced tariffs to level the trade playing field with countries worldwide. Tariffs are trade barriers that distort prices. Time will tell if the tariffs impact the cocoa export market.
Short-term levels to watch
While cocoa remains in a long-term bullish trend since breaking above the 1977 high, the short-term path of least resistance since December 2024 has turned bearish.
The nine-month daily chart illustrates cocoa’s decline over the past months. While resistance is at the December high of nearly $13,000 per ton on the continuous contract, May futures resistance is at the $12,193 level. Technical support levels are $7,770, the March 4, 2025, low, $5,724, the October 25, 2024, low, and $5,443, the July 1, 2024, low. All the support levels are above the 1977 $5,104 high, which stands as the primary ingredient in chocolate’s critical technical support.
Cocoa futures are the only route for participation
Cocoa is a highly volatile soft commodity, and the high price variance over the past months has created many trading opportunities on the upside. The current decline is creating more trading opportunities.
The only route for risk positions in cocoa is through the futures and futures options on the Intercontinental Exchange, as there are no ETF or ETN products that track the soft commodity. Each cocoa contract contains ten metric tons, worth $82,390 at $8,239 per ton. Original margin is $15,235 per contract. A market participant can control $81,900 worth of cocoa for an 18.5% downpayment. If equity on a risk position falls below the $13,850 variation level, the exchange requires additional margin to maintain a long or short risk position.
Given the current bearish trends, cocoa prices are falling and will likely challenge technical support levels. However, the significant rally, supply concerns, crop concerns, and tariffs could cause periodic relief rallies over the coming weeks and months.
Even the most aggressive bullish and bearish trends rarely move in straight lines, creating many trading opportunities. High price volatility increases risk and reward potentials.
