Knowledge Bite
February 2026
Before you dive in, take your turn in our Monthly Knowledge Quiz to check how much you know about Cocoa Markets. Click this link or scan the QR code with your phone’s camera to access the quiz on your device.
Cocoa price drivers: a quick breakdown
See the ICE Connect Price Chart and the summary of the price drivers below:
- Tight West African Supply - Due to worsening disease pressure, ageing trees and weather issues. Price starts to rise from ~£2,000/t.
- Record Price Surge - Due to multi year supply deficits, low certified stocks and hot/dry conditions. Price rises rapidly to ~£10,250/t.
- Demand Destruction - Due to persistently elevated prices cocoa grindings fall indicating weaker industrial demand. Prices correct down to ~£5,000/t.
- Supply Outlook Improves - Due to better rainfall and pod counts in West Africa. Funds start to liquidate long positions. Price continues to move back towards long term average but still at ~£3,700/t.
Let’s consider how a market participant could have benefited from hedging with ICE London Cocoa futures during this period in the scenario below:
A European cocoa processor needs to secure physical cocoa beans for Q1 2024 production. In mid 2023, they see signs of tightening supply in West Africa (disease, ageing trees, adverse weather), which later drove prices sharply higher into 2024.They want to protect against rising raw material costs, so they go long ICE London Cocoa March 2024 futures (buy futures) as a hedge.
Hedge Established (May 2023)
March 24 futures price: £2,600/t
Futures: ICE London Cocoa (10t)
Action: Processor buys 20 contracts to hedge 200 tonnes for Q1 2024.
Why: Tightening supply and rising price risk.
Hedge Impact
Without a hedge:
Physical cost jumps from
~£2,600/t → ~£5,000/t
Increase:
≈ £2,400/t → £0.48m extra for 200t
With a long futures hedge:
Futures bought at ~£2,600/t, settled near ~£5,000/t
Profit: ≈ £2,400/t, also ~£0.48m total
Futures gains offset physical cost surge, keeping effective input cost at £2,600/t
Price Shock (2024)
By december 2024, cocoa prices hit historic highs near £10,250/t, pushing physical prices to record levels and dramatically raising costs for anyone unhedged.
Why ICE London Cocoa Futures are effective
- Contract aligns with West African cocoa, the core price driver
- Strong liquidity even during volatility
- Reliable convergence with physical prices
- High correlation enables near 1:1 offset
To explore how the physical and ICE cocoa futures markets connect, check out our course run in partnership with the Federation of Cocoa Commerce (FCC).
Ready for a challenge? Try our new interactive quiz to test your knowledge about Cocoa markets and see how much you’ve learned from this month’s edition. It’s quick, engaging, and a great way to stay sharp. Click here to take the quiz.
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