Short Covering Propels Cocoa Prices Higher

September ICE NY cocoa (CCU26) on Tuesday closed up +87 (+1.58%), and September ICE London cocoa #7 (CAU26) closed up +76 (+1.86%).

Cocoa prices settled higher on Tuesday amid short covering as they consolidate above last week’s lows.

Last Thursday, cocoa prices fell to a two‑week low amid concerns about global demand after the European Cocoa Association reported that Q2 European cocoa grindings dropped 4.6% to 316,366 MT, exceeding the expected 1.5% decline and marking the lowest Q2 level in six years. Prices rebounded on Friday when the National Confectioners Association said Q2 North American cocoa grindings rose 7.7% year‑over‑year to 109,659 MT, well above the forecasted 1% decline, easing demand worries. Asian demand also improved, with the Cocoa Association of Asia reporting a 25% year‑over‑year rise in Q2 grindings to 224,646 MT, surpassing expectations of 9%.

Larger global cocoa supplies weigh on prices. Tuesday’s cumulative data from Ivory Coast showed that 2.10 MMT of cocoa was shipped to ports in the current marketing year (Oct 1 2025‑July 19 2026), a 21% increase versus the same period last year. Bloomberg reported that Nigerian June cocoa exports rose 30% year‑over‑year to 18,922 MT.

Rising inventories are bearish for prices, as ICE cocoa stocks climbed to a two‑year high of 3,285,161 bags on Tuesday.

Cocoa prices have rallied sharply over the past month, with NY cocoa reaching a six‑month high and London cocoa a nine‑month high earlier this month. Heavy rains in Ivory Coast and Ghana have flooded roads, hindering farmers’ access to farms and ports and threatening global supplies. Excess moisture also raises the risk of brown rot and black pod diseases, reducing yields and jeopardizing the harvest.

A recovery in demand is bullish for prices; Barry Callebaut AG, the world’s largest cocoa processor, reported on July 9 that its fiscal Q3 sales rose 5.7%, the first increase in more than two years.

Medium‑term support for cocoa prices comes from weather concerns. The U.S. Climate Prediction Center said on July 8 that the El Niño pattern emerging across the equatorial Pacific is likely to be one of the strongest in over 75 years. El Niño typically brings warmer, drier conditions to West Africa, reducing soil moisture, stressing cocoa trees, and lowering yields.

Early surveys of the 2026/27 Ivory Coast cocoa crop indicate below‑average cherelle formation, poor pod development and an estimated 1.8 MMT for the season beginning in September, down 18% from about 2.2 MMT in 2025/26. Markets await new surveys in July to finalize the crop size.

Prices were pressured last month amid abundant supply. On June 11, Ivory Coast raised its estimate of cocoa reaching ports by more than 260,000 MT this season. The country also projected a 10.8% year‑over‑year decline in 2025/26 production to 1.65 MMT from 1.85 MMT in 2024/25.

The outlook for tighter supplies in Nigeria, the world’s fifth‑largest cocoa producer, supports prices. Nigeria’s Cocoa Association forecasts a 11% year‑over‑year drop in 2025/26 production to 305,000 MT from 344,000 MT in 2024/25.

In February, Ghana reduced the official price paid to its cocoa farmers by nearly 30% for the 2025/26 season. In March, Ivory Coast announced a 57% pay cut for farmers effective for the mid‑crop harvest that began in March. Together, the two countries produce more than half of the world’s cocoa.

A smaller global surplus is supportive of prices. StoneX revised its 2026/27 global cocoa surplus estimate down to 149,000 MT from a January forecast of 267,000 MT, citing risks to West African crops from an expected El Niño event. It also lowered its 2025/26 global surplus forecast to 247,000 MT from 287,000 MT.

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