Cocoa Market Analysis - February 2026
Market Overview
On February 24, 2026, cocoa futures on the ICE experienced a significant decline, dropping over 5% and falling below the $3,000 per tonne mark for the first time since May 2023. This downturn is attributed to several factors, including weak physical demand, a slowdown in processing activities, favorable weather conditions in West Africa, and expectations of a strong harvest season, all of which are negatively impacting returns for African farmers.
CFTC Commitments of Traders (CoT) Analysis
The latest CoT report, based on data from February 17, 2026, indicates that the cocoa market is currently in a transitional phase rather than experiencing a clear trend. A notable change in the report is the reduction of open interest by over 8,000 contracts (approximately -5%), suggesting that some market participants have closed their positions. This decline in open interest typically signals a cooling market and a shift towards consolidation.
In terms of market positioning, the largest speculative players, categorized as Managed Money, are net short, indicating a bearish bias as they hold more short positions than long ones. Conversely, producers and commercial participants have reduced their hedges by cutting back on short positions, which historically suggests that supply-side pressures may be easing. This dynamic indicates that while speculators maintain a bearish outlook, the industry is not contributing to further downside pressure.
Short Position Concentration and Market Risks
It is important to note the concentration of short positions within a limited number of traders. A significant portion of the short positions is held by a small group of entities, which raises the risk of a short squeeze. Should a bullish catalyst arise—such as favorable weather or supply-related news—this could lead to forced short covering, potentially resulting in a sharp market rebound.
Overall, the CoT report does not indicate an extreme overbought or oversold condition. The positioning reflects a moderate bearish sentiment among funds, but with declining participation and hedgers stepping back, the likelihood of consolidation or a technical rebound increases. A return to a clear downtrend would likely necessitate a renewed buildup of short positions by funds alongside rising open interest.