Dollar Strength Triggers Long Liquidation in Cocoa Futures Amid Market Volatility

Cocoa futures fell on Wednesday as a stronger U.S. dollar prompted traders to unwind bullish positions, adding pressure to an already volatile market that has seen wild price swings in recent months. 

📉 Cocoa Futures Pull Back After Recent Rally 

Both ICE New York cocoa (CCN25) and ICE London cocoa prices declined as investors opted to book profits amid renewed strength in the dollar. The gains in the greenback made dollar-denominated commodities like cocoa more expensive for holders of other currencies, reducing demand and encouraging position squaring. 

“Long liquidation was triggered as the U.S. dollar firmed and speculative funds began to exit after cocoa’s sharp run-up,” said a commodity strategist with a European trading firm. 

Cocoa prices have been extremely volatile in 2024 and 2025, with New York cocoa hitting record highs in April due to concerns over tight global supply, particularly from West Africa, the world’s primary cocoa-producing region. 

💱 Dollar Strength Adds Pressure 

The U.S. Dollar Index rose to a three-week high on Tuesday, fueled by hawkish comments from Federal Reserve officials and stronger-than-expected economic data. A firmer dollar typically weighs on soft commodities by reducing international buying interest. 

Traders say speculative funds and institutional investors, who had built large long positions amid fears of supply shortages, are now unwinding some of those bets in response to changing macroeconomic signals. 

🌍 Supply Concerns Remain, But Momentum Cools 

Despite the recent retreat, analysts caution that cocoa’s longer-term fundamentals remain supportive. Production disruptions in Côte d'Ivoire and Ghana, driven by disease, weather, and logistical challenges, continue to constrain global supply. The International Cocoa Organization (ICCO) recently projected a global supply deficit of over 400,000 tonnes for the 2024/25 season. 

However, with prices having more than doubled year-over-year at their peak, market momentum appears to be cooling — at least in the short term. 

“Long-term supply constraints are still intact, but after such a strong rally, the market is due for a breather,” said an analyst at a London-based brokerage. 

📊 Outlook: Market Eyes Macro Trends and Weather Going forward, traders will closely monitor currency movements, weather developments in West Africa, and updates from the ICCO for supply-demand outlook revisions. In the short term, cocoa may continue to experience choppy trade as speculators reassess positions amid broader economic uncertainty. 

While cocoa’s bullish fundamentals remain, the recent strength in the U.S. dollar has sparked a wave of long liquidation. This correction could provide temporary relief to cocoa buyers, but underlying concerns about tight supply continue to cast a shadow over the market.

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