Cocoa prices are climbing once again, driven by climate conditions that threaten the West African harvest. This renewed supply risk adds pressure to chocolate manufacturers still recovering from the historic price spike of 2024, emerging just weeks before Halloween when demand typically peaks. New York cocoa futures closed at $5,670 per metric ton on Friday, as traders reacted to supply concerns and reversed some of the previous session’s losses.
Goldman Sachs recently cautioned that a potentially potent El Niño could expose the cocoa market to another supply squeeze. Lina Thomas, a Goldman analyst, noted that the current growing season mirrors the conditions that preceded the 2023-24 cocoa crisis, characterized by excessive early rainfall followed by unusually dry weather. According to Thomas, constrained inventories, reduced supplies, and demand adjustments following the last spike may leave the physical market with less cushion to absorb a further shortfall.
“It seemed as if a recovery was coming,” said Tedd George, founder of Kleos Advisory, a firm specializing in African markets. “So that could get completely blown out of the water by what’s happening with El Niño.” Cocoa prices first surged past $11,000 per metric ton in April 2024, eventually hitting a record high of $12,565 in December. Prior to that, futures had largely traded between $1,000 and $3,500 between 2000 and the third quarter of 2022.
Thomas believes the cocoa market may now be more exposed to a poor harvest than it was during the 2023-24 crisis. However, she does not anticipate the same liquidity squeeze in the futures market that amplified the last shortage into an unprecedented rally. Hedge funds and other traders entered the market in late 2023, accumulating a record $8.7 billion worth of contracts on London and New York exchanges by early 2024, according to the Bureau of Labor Statistics. That activity compounded the rally as major confectioners scrambled to secure supply.
“I would expect the market to handle it better this time,” George said, adding that he does not foresee a return to $12,000 prices. He suggests the larger risk lies in cocoa facing repeated disruptions rather than a single extraordinary shortage. “For the short to medium term, we’re going to have a series of shocks which are going to come from time to time,” he warned, cautioning that shifting growing conditions could eventually trigger a “structural decline in production.” Cocoa is particularly sensitive to rainfall and temperature changes, and Goldman sees significant upside risk if El Niño worsens conditions.
To offset historically high costs, chocolate makers have implemented strategies including price hikes, smaller package sizes, hedging, and product reformulation. Following the last price shock, manufacturers reduced their reliance on cocoa beans by lowering cocoa content or altering ingredients, Goldman noted. Recent financial results underscore the strain on the industry. Lindt & Sprungli cut its 2026 sales-growth forecast, citing “subdued consumer sentiment and increased price sensitivity.” Hershey stated it is better positioned to manage volatility following supply chain diversification and strengthened hedging, with CFO Steven Voskuil noting reduced reliance on any single region. Barry Callebaut reported a 4.4% decline in the global chocolate confectionery market during its fiscal third quarter, while Nestlé attributed a 20 basis point drop in gross profit margin to rising coffee and cocoa costs, one basis point equalling 0.01%.
The pivotal question remains whether consumers will continue absorbing higher prices and at what threshold they begin cutting back. “People haven’t stopped wanting cocoa,” George said. “It’s just whether consumption patterns are going to start to change.”