Daily Cocoa Market Report (7 Jan 2026): Early Weakness Tests Lows, No Downtrend Confirmation

Rumors of a smaller cocoa harvest in Ecuador are circulating, which introduces a short-term supply-shock narrative into market sentiment. Despite the speculation, analysts continue to treat Ecuador as the second-largest cocoa producer globally. Forecasting agency CRA maintains a long-range projection of approximately 800,000 metric tons of output, extending its outlook through the 2034/35 season. This contrast suggests that while a localized shortfall story can trigger volatility, the structural view on Ecuador’s production capacity remains stable.

CRA and Reuters reference expectations of a better mid-season crop, while TRS does not foresee meaningful improvement. When major providers diverge on supply assessments, the signal is uncertainty, not confirmation of a definitive shortage. In such environments, market structure, positioning, and fund flows typically exert more influence on price than conflicting farm-level narratives.

Current fundamentals do not justify a sustained cocoa rally. They point to likely offsetting pressure from traditional fund selling and price-fixing actions by producing countries. Milling yields in West Africa are highlighted as a demand risk, particularly if prices stay elevated, because high input costs tend to reduce processing appetite and efficiency. These factors lean bearish from a real economy perspective, where consumption and grind volumes, not headline production rumors, anchor long-term price trends.

The index fund rebalancing scheduled to begin today and run for five days is not a response to shifting fundamentals; it is a technical, flow-driven event. During rebalancing windows, passive funds adjust exposure mechanically, often creating temporary price dislocations. These flows can amplify moves in either direction, but they should be interpreted as liquidity effects rather than evidence of durable demand or tightening global supply.

Ghana Inflation & Macro Influence

Ghana’s December disinflation trend (5.4% YoY, 0.9% MoM decline) reinforced expectations that the Bank of Ghana retains policy space for further easing, supporting rate-cut probability at the 28 Jan 2026 meeting. The inflation slowdown was broad-based, led by food (1.7% MoM drop) and mild cooling in non-food (0.3%), while improved currency conditions, partly aided by commodity inflows into gold and cocoa, reduced imported price stress. For cocoa markets, the relevance is second-order but meaningful: stronger rate-cut expectations can improve non-commercial liquidity tolerance and help moderate front-curve liquidation pressure, but do not currently outweigh the dominant curve drivers, which remain sideways, carry-supported, and spread-active rather than backwardated.

Futures Performance

US — ICE Cocoa Futures (CC)

UK — ICE London Cocoa Futures

Wednesday extended the pullback across both cocoa curves, but the US retracement was materially heavier than London, reinforcing a front-led liquidity unwind rather than any scarcity-driven curve stress. In London, March-26 fell from 4,294 to 4,273 (−21, −0.49%), while the rest of the first five maturities softened in a tight band. That profile is orderly and curve-consistent, typical of profit-taking and spread rebalancing rather than forced liquidation. In New York, the price declines were larger and more progressive into the deferred end: March-26 dropped from 5,989 to 5,934 (−55, −0.92%), confirming stronger risk reduction and higher elasticity in the US curve. Importantly, the front spreads continued to trade at a discount rather than tightening into backwardation: London’s Mar/May sat at −2 GBP (4,273 vs 4,275), while New York’s Mar/May widened to −44 USD (5,934 vs 5,978), consistent with calendar-spread pressure and liquidity rotation, not prompt supply stress. Volume also backed the interpretation: US total volume increased to 36,643 from 29,917, while London edged up to 18,921 from 18,419, showing participation improved even as price stayed range-bound and corrective.

Contango / Backwardation

London and New York cocoa futures both traded in contango on 7 January 2026 when measured on sequential CLOSE# pricing, meaning deferred contracts were not priced below the front month and still embedded carry economics rather than a prompt convenience premium. The UK curve remained tightly carry-aligned, with March-26 closing at 4,273 GBP, and deferred months holding near-flat to slightly higher, showing no sustained prompt premium formation. In the US, the front also stayed in contango, but the slope was more elastic, with March-26 at 5,934 USD and May-26 higher, while back months softened more sharply — a profile of liquidity rotation, not curve inversion. Backwardation, which occurs when prompt contracts trade above and structurally above deferred months due to immediate physical tightness, did not emerge in either curve, and near-curve discounts (London ~−2 GBP, US Mar/May ~−44 USD) confirm the market was expressing spread-driven risk cycling rather than prompt supply stress.

US–UK Spread

5,934 − (4,273 × 1.346) = +182.64 USD (down from 191 USD)

On Wednesday 7 January 2026, the prompt arbitrage spread between ICE U.S. and ICE London cocoa (March-26) was unchanged in real terms when normalized to the correct exchange rate of 1.346. The UK March-26 contract closed at 4,273 GBP, which converts to 5,751.36 USD (4,273 × 1.346). Against the U.S. March-26 price of 5,934 USD, the spread was: 5,934 − 5,751.36 = +182.64 USD, effectively the same economic gap after accounting for FX, confirming that the previously cited +191 USD on Tuesday was a function of a slightly different conversion basis, not a true widening or tightening in the arb window. The stability of the spread, paired with elevated calendar-spread participation and no backwardation risk forming, reinforces that relative front strength remains flow-led and arbitrage-balanced rather than scarcity-anchored.

Volume & Open Interest

US — CC-Cocoa Futures

US activity stayed elevated throughout and then accelerated sharply on 7 Jan (36,643), confirming a major participation surge in the prompt complex. Open interest built meaningfully into 6 Jan (125,812 → 127,271, +1,459), showing that the pre-7 Jan rally/pullback sequence involved real exposure growth, not only turnover.

UK — C-London Cocoa Future

London volume rebuilt steadily from year-end (8,850 on 31 Dec) into a post-holiday normalization (18,419 on 6 Jan; 18,921 on 7 Jan), confirming a liquidity recovery rather than a breakout regime. Open interest rose consistently through 6 Jan (160,189 → 161,423, +1,234), indicating net position addition alongside rising activity—more consistent with structured carry/hedger positioning than pure churn.

Warehouse Inventory

What to Expect Tomorrow

Tomorrow’s cocoa futures session is most likely to open in a tactical consolidation phase, initially respecting a range between 5890 and 6000, as both the 5-minute and 1-hour moving averages are flattening with only mild late-session bearish slope. Daily RSI sits near 50, indicating neutral trend conditions, while short-term stochastic is curling upward from the lower band, supporting the potential for early intraday bounce rather than sustained trend extension. The key market-defining triggers will be a decisive break above 6000 with expanding volume, which would shift bias toward 6030–6050 and possibly 6080 on extension, or a failure to hold 5890, which would expose 5850, 5830, and 5800 as downside session magnets. Volume participation on recent swings has been moderate, so only a material surge above average will validate direction and reduce chop; absent that, expect mean-reversion behavior at range extremes, increased whipsaw risk, and a market best played with fades at the edges or breakout-confirmation entries with tight stops anchored to 6000 for longs and 5890 for shorts.

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.