Just caught the cocoa rally today - NY futures up 5.73% and London up 4.76%, posting 1.5-week highs. The Iran situation is triggering some serious short covering as traders worry about Strait of Hormuz closure spiking shipping costs and limiting cocoa exports. But honestly, the bigger picture is still bearish. ICCO raised their 2024/25 surplus estimate to 75,000 MT, and we're looking at global production climbing 8.4% to 4.7 MMT. Supply is everywhere right now.

Demand is the real problem though. Barry Callebaut reported a 22% drop in cocoa division sales volume, and European grindings fell 8.3% last quarter - worst Q4 in 12 years. Meanwhile, West African growing conditions are looking solid, cocoa pod counts are running 7% above the five-year average, and the Ivory Coast mid-crop is expected to be strong when it starts in March. Ivory Coast and Ghana just slashed farmer payments by 30-57%, which tells you everything about where prices are headed.

ICE inventories hit 6.5-month highs, and Rabobank cut their surplus forecast to 250,000 MT. This rally feels temporary - the structural oversupply story hasn't changed.