Hershey Boost Sparks Cocoa Rally Amid Surplus Data

Hershey Boost Sparks Cocoa Rally Amid Surplus Data

Last week cocoa futures experienced a sharp but short-lived rebound after major chocolate-maker Hershey issued an upbeat outlook for 2026. The move underscored how sensitive prices are to demand signals from large end-users. However, a dominant thread of bearish supply-side data — including StoneX surplus forecasts, rising stocks and weakening grind numbers — continues to weigh on longer-term cocoa prices.

What Drove the Recent Price Move

Short-covering and demand sentiment

On February 6, March ICE New York cocoa futures jumped roughly 2.7% while London cocoa rose about 3.1% after Hershey’s optimistic guidance. Market participants interpreted the outlook as a sign of firmer near-term demand from a key consumer of cocoa, prompting short-covering and a technical rebound. This demonstrates that manufacturer commentary can spark rapid positioning changes even when underlying fundamentals remain unchanged.

Price context and recent levels

Despite the rebound, prices remain materially depressed compared with recent peaks. Cocoa has fallen sharply over the past month and year, trading near two-year lows in early February at just over $4,100 per tonne. The rally recovered only a fraction of the broader downtrend driven by oversupply and weak processing demand.

Supply Signals Keeping Prices Under Pressure

StoneX surplus projections and stocks

StoneX projects significant surpluses — roughly 287,000 tonnes for 2025/26 and about 267,000 tonnes for 2026/27 — a structural overhang that pressures prices. Global cocoa stocks have expanded year-on-year by an estimated 4.2% to around 1.1 million tonnes, amplifying the bearish case. Higher warehouse and port inventories mean buyers can delay purchases without risking shortages, which depresses spot and futures levels.

Grinding data and manufacturer volumes

Demand-side indicators have been weak. Cocoa grindings — the closest real-world measure of processing demand — showed contraction in major regions: Europe declined by roughly 8.3%, Asia by about 4.8%, while North America saw only modest growth near 0.3%. Major processor Barry Callebaut reported a 22% drop in cocoa-division volumes for its quarter ending November 30, 2025. These figures confirm that end-user consumption is not yet strong enough to absorb higher harvests.

Regional Harvest Notes and Logistics

West Africa flows

Ivory Coast deliveries from October 1 to February 1 totaled approximately 1.23 million tonnes, down about 4.7% year-on-year — a limited support factor. While lower-than-expected deliveries can tighten nearby supply, the cumulative build in global stocks and forward surplus projections have outweighed that effect so far.

Implications for Traders and Industry Participants

Short-term tactical view

Sentiment-driven rallies tied to corporate outlooks can produce quick trading opportunities. However, traders should weigh short-covering moves against the prevailing surplus narrative and rising inventories before committing to long positions.

Positioning for processors and buyers

Chocolate manufacturers that are hedged at higher price levels may not see immediate relief; the broader supply-demand balance suggests downward pressure may persist unless grindings and consumer demand rebound materially. Procurement teams should monitor upcoming grind reports, inventory statistics, and harvest updates from West Africa for clearer directional cues.

Conclusion

Hershey’s positive outlook briefly lifted cocoa futures, showing how demand signals from large buyers influence market sentiment. Nevertheless, robust surplus forecasts from StoneX, rising stocks and weak grindings point to sustained downside pressure. Near-term price spikes are possible on headlines, but the structural oversupply and soft processing demand remain the dominant forces shaping cocoa prices.