Cocoa Prices Decline as West African Weather Concerns Abate; El Niño Outlook Clouds Future

July ICE NY cocoa (CCN26) on Wednesday closed down -74 (-1.93%), and July ICE London cocoa #7 (CAN26) closed down -44 (-1.50%). Cocoa prices slipped on Wednesday amid forecasts of dry conditions moving into West Africa later this week, which are expected to alleviate current flooding concerns. Prices had risen earlier in the week after cocoa farmers in the Ivory Coast reported that heavy rain and winds had damaged young flower buds and cocoa trees.

Last Friday, cocoa prices fell to two-week lows amid rising inventories. ICE cocoa inventories reached a 1.75-year high of 2,929,074 bags last Friday.

An excessively short position by funds could fuel any short-covering rally in NY cocoa. Last Friday’s weekly Commitment of Traders (COT) report showed money managers increased their short positions in NY cocoa by 2,963 in the week ended June 2 to 21,111 net short positions, the most in more than three years.

The medium-term downside for cocoa may be limited amid mounting weather concerns. Japan’s Meteorological Agency on Wednesday confirmed an El Niño weather pattern had formed across the equatorial Pacific. The formation of an El Niño pattern could bring warmer, drier conditions to West Africa, potentially harming cocoa production there. The US National Oceanic and Atmospheric Administration (NOAA) estimates a 67% chance of a “Super El Niño” this year, one of the strongest ever recorded.

Cocoa prices also find support from early surveys of the 2026/27 West African cocoa crop, which show below-average cherelle formation on cocoa trees, signaling a weak outlook for the main cocoa harvest beginning in October.

Increased cocoa shipments from the Ivory Coast are bearish for prices. Monday’s cumulative data from the Ivory Coast showed that farmers shipped 1.69 MMT of cocoa to ports in the current marketing year (October 1, 2025, through June 7, 2026), up +3.0% from the same period a year ago. Additionally, on May 14, the Ivory Coast raised its cocoa delivery estimate to 2.2 MMT for the 2025/26 season, up from a previous projection of 1.8-1.9 MMT, citing favorable weather.

Signs that consumer demand for chocolate is holding up are a positive factor for cocoa prices. Recent earnings results from top chocolate makers Hershey and Mondelez International exceeded expectations, indicating that consumer demand for chocolate remains steady despite high prices. However, Circana reported on April 14 that chocolate candy sales in North America in the 13 weeks ending March 22 fell 1.3% from the same period a year ago.

The prospects of a smaller global surplus are also supportive of cocoa prices. On April 29, StoneX cut its 2026/27 global cocoa surplus estimate to 149,000 MT from a January forecast of 267,000 MT, citing risks to the West African cocoa crop from an expected El Niño weather event. StoneX also lowered its 2025/26 global cocoa surplus forecast to 247,000 MT from a January estimate of 287,000 MT.

The prolonged closure of the Strait of Hormuz is disrupting global cocoa supplies and supporting prices. The closure raises fertilizer supplies, global shipping rates, insurance costs, and fuel prices, thereby increasing cocoa importers’ costs.

Weak global cocoa demand is bearish for prices. The National Confectioners Association reported April 23 that North American Q1 cocoa grindings fell -3.8% y/y to 106,087 MT. Additionally, the European Cocoa Association reported that Q1 European cocoa grindings fell -7.8% y/y to 325,895 MT, a larger decline than expectations of -6% y/y and the lowest for a Q1 in 17 years. Conversely, the Cocoa Association of Asia reported that Q1 Asian cocoa grindings unexpectedly rose +5.2% y/y to 223,503 MT, stronger than expectations of a decline of -6.7% y/y.

Smaller cocoa supplies from Nigeria, the world’s fifth-largest cocoa producer, are supportive for prices. On May 28, Bloomberg reported that Nigerian cocoa exports in April fell -20% y/y to 14,921 MT. Nigeria’s Cocoa Association projects that Nigerian cocoa production in 2025/26 will fall by -11% y/y to 305,000 MT, from a projected 344,000 MT for the 2024/25 crop year.

In February, Ghana cut the official price it pays its cocoa farmers by nearly 30% for supplies for the 2025/26 growing season, and the Ivory Coast in March also announced a 57% cut in cocoa farmer pay that will apply to the mid-crop harvest starting in March. The Ivory Coast and Ghana produce more than half of the world’s cocoa.

On the bullish side, the Ivory Coast said its cocoa production in 2025/26 would fall -10.8% y/y to 1.65 MMT from 1.85 MMT in 2024/25. On February 10, Rabobank cut its 2025/26 global cocoa surplus estimate to 250,000 MT from a November forecast of 328,000 MT.

As a bullish factor, the International Cocoa Organization (ICCO) on Friday, May 29, cut its global 2024/25 cocoa surplus estimate to 48,000 MT from 75,000 MT in March, marking the first surplus in four years. ICCO estimated that global cocoa production in 2024/25 climbed by +8.3% y/y to 4.723 MMT.

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