Cocoa Prices Rally on Short Covering as Markets Prepare for Extended Holiday Break

July ICE NY cocoa (CCN26) closed up +29 points (+0.77%), and July ICE London cocoa #7 (CAN26) closed up +10 points (+0.45%) on Friday.

Cocoa prices rebounded from 2.5-week lows as short covering gained momentum ahead of the long holiday weekend, when markets in the US and UK will be closed on Monday.

Since reaching 3.75-month highs the previous Monday, cocoa prices had retreated to 2.5-week lows amid expectations of ample supply. The Ivory Coast increased its cocoa delivery estimate for the 2025/26 season to 2.2 million metric tons, up from the prior projection of 1.8-1.9 million metric tons, citing favorable weather conditions.

Increased cocoa supplies from the Ivory Coast are bearish for prices. Cumulative data from the Ivory Coast showed farmers shipped 1.61 million metric tons of cocoa to ports in the current marketing year (October 1, 2025, through May 17, 2026), representing a 1.9% increase from the same period a year earlier.

Additionally, ICE cocoa inventories rose to a 1.75-year high of 2,704,116 bags on Friday, signaling further supply pressure.

Prices had surged to 3.75-month highs the previous Monday amid concerns that the developing El Niño weather pattern could bring warmer, drier conditions to West Africa, potentially impacting cocoa production. The US National Oceanic and Atmospheric Administration (NOAA) estimates an 82% probability of El Niño conditions emerging between May and July and persisting through year-end, with a 67% chance of a “Super El Niño.”

Cocoa prices also find support from early surveys indicating below-average cherelle formation on West African cocoa trees, suggesting a weak outlook for the main cocoa harvest beginning in October.

Steady consumer demand for chocolate provides upward support for cocoa prices. Recent earnings from Hershey and Mondelez International exceeded expectations, indicating resilient chocolate demand despite high prices. However, Circana reported that chocolate candy sales in North America declined 1.3% in the 13 weeks ending March 22 compared to the same period a year ago.

The prospect of a smaller global surplus is also bullish for cocoa. On April 29, StoneX reduced its 2026/27 global cocoa surplus estimate to 149,000 metric tons from a previous forecast of 267,000 metric tons, citing El Niño-related production risks in West Africa. The firm also lowered its 2025/26 surplus forecast to 247,000 metric tons from 287,000 metric tons.

The ongoing closure of the Strait of Hormuz continues to disrupt global supply chains, supporting cocoa prices by reducing fertilizer availability, increasing shipping rates, insurance costs, and fuel prices, thereby raising importer costs.

Weak global cocoa demand pressures prices downward. The National Confectioners Association reported that North American Q1 cocoa grindings fell 3.8% year-over-year to 106,087 metric tons. The European Cocoa Association noted Q1 European cocoa grindings declined 7.8% year-over-year to 325,895 metric tons—a larger drop than the expected 6% decline and the lowest Q1 level in 17 years. Conversely, the Cocoa Association of Asia reported an unexpected 5.2% year-over-year increase in Q1 Asian cocoa grindings to 223,503 metric tons, exceeding expectations of a 6.7% decline.

Smaller cocoa supplies from Nigeria, the world’s fifth-largest producer, provide support. Nigerian cocoa exports in March declined 35% year-over-year to 18,052 metric tons. Nigeria’s Cocoa Association projects a 11% year-over-year decline in production to 305,000 metric tons for the 2025/26 season.

Insufficient rainfall in West Africa has exacerbated drought concerns, with over half of the Ivory Coast and roughly two-thirds of Ghana experiencing drought conditions as of March 29, according to the African Flood and Drought Monitor.

In April, Ghana cut the official price paid to cocoa farmers by nearly 30% for the 2025/26 season, while the Ivory Coast announced a 57% reduction for the mid-crop harvest. Both countries produce more than half of the world’s cocoa.

On the bullish side, the Ivory Coast forecasts a 10.8% year-over-year decline in cocoa production to 1.65 million metric tons for 2025/26. Rabobank reduced its 2025/26 global cocoa surplus estimate to 250,000 metric tons on February 10.

As a bearish factor, the International Cocoa Organization (ICCO) raised its 2024/25 global cocoa surplus estimate to 75,000 metric tons on March 2, up from 49,000 metric tons in November—marking the first surplus in four years. ICCO estimated global cocoa production increased 8.4% year-over-year to 4.7 million metric tons for 2024/25.

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