Weather concerns clash with ample cocoa supplies

The cocoa market has been driven primarily by a battle between short-term and long-term fundamentals over the past week. On the one hand, concerns over the 2026/27 crop continue to mount as extreme weather affects West Africa and El Niño makes a return. On the other hand, the current season remains characterised by ample supplies, inventories continue to increase, and demand from the chocolate industry remains weak. The result is a highly volatile market, where sharp daily price swings have become the norm rather than the exception.Following a spectacular rally of more than 20% in just two weeks, cocoa futures in London and New York reached their highest levels in around five months last week. The surge was driven almost entirely by rising weather risk premiums. Market participants fear that the main crop in Côte d’Ivoire and Ghana, which begins in September, could prove significantly smaller than previously expected.The reasons for these concerns are unusual. Heavy rainfall is currently causing flooding, making plantations difficult to access and increasing pressure from fungal diseases such as black pod. At the same time, meteorologists expect the developing El Niño event to shift towards warmer and drier conditions later this year. Similar weather patterns during the previous El Niño episode resulted in substantial production losses.Production risks increaseThe most worrying reports are emerging from Ghana. Farmers say that persistent rainfall is causing cocoa blossoms to drop before pods have a chance to develop. Disease pressure is also increasing rapidly, as fungicides are not available in sufficient quantities everywhere. Several growers are openly warning that the 2026/27 harvest could be substantially smaller if weather conditions fail to improve soon. Reuters even described the recent rainfall as the heaviest in more than a decade.Similar concerns are emerging from Côte d’Ivoire, where the development of the new main crop is also lagging behind expectations. Early field assessments point to limited pod formation. As a result, some market participants now expect production to be almost one-fifth lower than in the current season.Current season still characterised by ample suppliesThese concerns, however, stand in sharp contrast to the current supply situation. Arrivals in Côte d’Ivoire remain surprisingly strong. Since the start of the season, around 1.91 million tonnes of cocoa have been delivered to the country's ports, more than 18% above the level recorded a year earlier. Nigeria has also reported robust export performance, with cocoa exports in May rising by 28% compared with the same month last year. These figures prompted a round of profit-taking earlier this week after the market had become technically overbought.Meanwhile, ICE-certified cocoa stocks continue to increase and have now reached their highest level in around 18 to 24 months. This confirms that physical availability in the short term is considerably better than it was only a few months ago.Demand remains the weakest linkDemand continues to provide little support to the market. The exceptionally high cocoa prices of recent years are still taking their toll on chocolate manufacturers. In Europe, first-quarter cocoa grindings fell by almost 8%, marking the lowest first-quarter processing volume in seventeen years. North America also recorded another decline in grindings. Asia remains the only bright spot for the time being, posting modest growth in processing volumes. This weak industrial demand continues to offset growing concerns over weather conditions in West Africa.