Noticed cocoa futures got hit pretty hard on Friday - NY March contract down 0.29% and London down 0.52%. The weakness is consolidating above recent lows, but the broader trend still looks bearish. Weak dollar did spark some short covering, but that's just noise.

The real story here is the supply-demand mismatch. Global cocoa surplus is projected at 287,000 MT for 2025/26 according to StoneX, and ICCO reported stocks up 4.2% year-over-year to 1.1 MMT in January. Meanwhile, demand is getting crushed - chocolate makers are struggling because consumers won't pay the elevated prices. Barry Callebaut reported a 22% drop in cocoa division sales volume last quarter. Grinding data across Europe, Asia, and North America all showing weakness or barely growing.

Inventories are piling up too. ICE cocoa stocks hit a 1.5-year high of 2.96 million bags on Thursday. That's a lot of supply sitting around waiting for buyers. If you're looking at cocoa exposure through a cocoa ETF or futures, this oversupply situation is definitely something to monitor.

There are some supportive factors - Ivory Coast shipments are down 4.7% year-over-year, and Nigeria's exports fell 7% in November. But West Africa's harvest is looking healthy with favorable growing conditions, so that upside supply could pressure prices further. Seems like the bears have the upper hand for now.