Cocoa market swings between ample supply and crop concerns

The cocoa market has been pulled in different directions in recent weeks, caught between comfortable supply levels and growing weather-related risks. On the one hand, arrivals from West Africa remain strong and prospects for the ongoing mid-crop are generally favourable. On the other, concerns are mounting over potential production risks for the 2026/27 season.Prices have edged higher at the start of this week. In New York, cocoa futures rose to $3,882 per tonne, while the London market also moved higher, closing Monday at £2,976 per tonne. Current prices remain broadly within the trading range seen since mid-May. The first half of last month saw a strong rally, but market activity has since become somewhat more subdued. On the supply side, conditions for the current season remain relatively supportive. In Côte d’Ivoire, by far the world’s largest cocoa producer, cocoa processing volumes in May increased by almost 40% compared with the same month last year. Traders also continue to report strong arrivals at Ivorian ports and generally positive expectations for the remainder of the mid-crop. These factors were a significant source of downward pressure on prices at the beginning of June. However, the market’s downside has proved limited. Over the past week, attention has increasingly shifted towards the next production season. Analysts and traders are becoming more concerned about the potential impact of El Niño on cocoa-growing regions across West Africa. Early indications suggest that harvests in both Côte d’Ivoire and Ghana could be smaller during the 2026/27 season. Those concerns have provided sufficient support to push prices higher again this week. Weather developments are playing a crucial role in shaping market sentiment. Many market participants view El Niño as the most significant risk facing the cocoa sector. Although the effects on cocoa production are not yet visible, fears are growing that higher temperatures and irregular rainfall could disrupt flowering and pod development. Analysts at BMI therefore expect weather-related risks to continue providing support to cocoa prices over the coming quarters. Balancing this fundamental support is the continued caution among speculative investors. Data from the US Commodity Futures Trading Commission (CFTC) shows that funds have further increased their net short positions in cocoa. This suggests that part of the market still expects adequate cocoa availability in the near term and remains unconvinced that prices are set for a rapid recovery. Alongside weather concerns, Ghana remains a key area of focus. The country continues to face challenges in financing its cocoa sector. The government is working on a new bond structure designed to fund cocoa purchases for the 2026/27 season. While local banks and pension funds appear willing to participate, the situation highlights the sector’s fragile financial position. Although this does not pose an immediate threat to current supply, it could have longer-term implications for investment and production capacity.