Daily Cocoa Market Report (31 Dec 2025): Cocoa Ends 2025 in Liquidity Coil

On Wednesday, 31 December, cocoa futures markets closed 2025 with technically coherent but venue-divergent settlement, following a massive fund-assisted rally on 29 December and a liquidation-driven down session on 30 December. ICE US cocoa softened in the nearby 2026 tenors, with Mar-26 leading the pullback, while Sep-26 closed unchanged, confirming stalling momentum at the deferred margin rather than structural weakness. Tuesday’s decline saw open interest contract by 956 contracts, validating long liquidation, not fresh short initiation.

ICE Europe cocoa, closing earlier in GMT, held comparatively stable, with only minor drift in Mar–Jul 2026 and a slight Sep-26 uptick, consistent with year-end book balancing under thin liquidity.

Trend signals compressed into year-end: 10/20/50-day moving averages are now converged to within $70, increasing the likelihood of volatility expansion as 2026 opens. Funds enter January cleaner, having added 757 longs (week ending 23 Dec) and reduced net shorts to 5,175 contracts. The late-December venue divergence remains a liquidity and settlement-timing artifact, not a prompt-supply stress signal.

As we turn into early January 2026, two flow-driven narratives are poised to materially amplify cocoa volatility even if near-term physical balances remain static. First, the reintroduction of cocoa into the Bloomberg Commodity Index (BCOM) acts as a classic mechanical-demand catalyst: index trackers and "shadow" funds must execute approximately $2 billion in buying (roughly 30,000 lots) on a compressed timetable, a non-discretionary flow that will likely raise realized volatility, concentrate liquidity in nearby tenors, and exacerbate the US–UK divergence as New York absorbs the initial algorithmic wave. Second, the market’s interpretation of Cocobod "buying 200,000 tons" requires critical reframing—while headlines conflate this with the 200,000-hectare rehabilitation plan, the physical accumulation is almost certainly a defensive maneuver to fulfill a backlog of deferred legacy contracts rather than a discretionary strategic reserve build. This distinction is pivotal for hedging logic: if Cocobod were building new reserves, they would economically need to hedge (selling futures against inventory), thereby capping price rallies; however, because they are effectively delivering beans to close out old debts (filling a "short" physical obligation), no fresh hedging pressure is hitting the market. This creates a potentially explosive "vacuum upside" where aggressive BCOM buying meets a total absence of producer selling, creating a reflexive flow loop where price action is dominated by systematic inflows rather than crop news. In this regime, the most reliable telemetry will be Open Interest: rising OI on up days confirms durable index accumulation, whereas falling OI warns of a fragile short-squeeze driven by the exit of commercial shorts who can no longer access physical supply.

The mechanical buying window for the Bloomberg Commodity Index (BCOM) rebalancing is scheduled to execute over a five-day "roll period" from Thursday, January 8, to Wednesday, January 14, 2026. During this window, index-tracking funds are mandated to purchase approximately 20% of their total target cocoa exposure each day to minimize market impact. However, market participants should anticipate significant "shadow" activity preceding these dates, as opportunistic traders and discretionary funds typically front-run the official flow starting in late December and intensifying through the first week of January (Jan 2–9). This pre-positioning creates a ramp in prices and open interest before the official indexers enter, meaning the actual Jan 8–14 window often functions as a liquidity event where early speculators sell their accumulated longs into the guaranteed index demand, potentially creating a "buy the rumor, sell the news" dynamic intra-window if the front-running has been excessive.

Futures Performance

New York Cocoa (ICE US)

The U.S. front curve softened at year-end, with Mar-26 leading the decline at -46 ticks, confirming that Tuesday’s rebound momentum stalled into the final session. The lack of follow-through buying and the flat Sep-26 tenor suggest liquidity constraints outweighed incremental risk-taking.

London Cocoa (ICE Europe)

London delivered a marginally mixed but largely stable settlement, with the only positive print in Sep-26 (+3 ticks), while the first three contracts drifted slightly lower. The uniformity and small magnitude of price changes align with systematic book-squaring rather than directional participation.

Contango / Backwardation

As of 31 December, ICE US cocoa futures remained in contango across the front 2026 tenors, but the curve showed clear stagnation into the nearby stack, reflecting year-end liquidity compression and the exhaustion of rebound momentum rather than a carry-driven advance. The Mar-26 through Jul-26 segment softened in settlement terms, while Sep-26 closed flat, leaving the front slope positive but less responsive, consistent with a market where implied storage, financing, and residual inventory availability still exceed immediate physical tightness.

ICE Europe cocoa also preserved a contango structure across the first four 2026 tenors, though London’s earlier GMT close limited participation and amplified settlement sensitivity. The Mar-26 to Jul-26 London segment drifted marginally lower, while Sep-26 printed a small positive change, confirming stability at the deferred edge but a muted carry signal in the prompt segment. Crucially, no sustained inversion or downward gradient developed to signal backwardation, confirming that prompt supply stress did not force nearby premiums above deferred pricing in either venue.

US–UK Spread

6,043 − (4,359 × 1.347) ≈ $171 (down from $199)

Volume & Open Interest

New York Cocoa (ICE US)

Turnover remains tactical and liquidity-limited, but prior OI contraction confirms risk was reduced selectively, not fully exited.

London Cocoa (ICE Europe)

London participation remains extremely low but structurally positioned, reflecting hedge maintenance and selective book squaring rather than liquidation.

Certified Stocks

Inventories confirm structurally intact carry premiums and no prompt-stress regime.

What to Expect Tomorrow

Price is compressed in the 6043–6065 resistance band, with support at 5840–5880 formed by prior consolidation and a rising trendline. The higher timeframe trend is still bullish, but intraday momentum has weakened, with volume spikes favoring down candles and H1 MACD crossed bearish. RSI is neutral and cooling, while OBV is flat, leaving breakout direction unresolved. A long setup requires a daily close above 6065 with volume expansion to target 6300–6500; a downside break and hold below 5880 with volume exposes 5700–5400. No trade is justified until a confirmed break, ideally validated by the second confirmation candle. Volume is expected to be light.

Wishing you a strong start to the year and a successful New Year ahead.

If you notice any discrepancies in these figures or have extra information, please email hello@cocoaintel.com or leave a comment – corrections and additional insights are always welcome.