Ample stocks curb cocoa prices after strong rally

The cocoa market is once again searching for direction. After the sharp price increase at the end of August, the market underwent a substantial correction last week. In the short term, cocoa availability is sufficient and exchange stocks are rising. However, the balance for the new season looks considerably tighter, mainly due to disappointing crop expectations in Ghana and Ivory Coast.The December contract in London reached £4,988 per tonne last Tuesday, its highest level in a year. Prices then fell sharply. The contract closed at £4,518 per tonne on Friday, a decline of around 7% over the week. The picture was similar in New York, where cocoa ended Friday at $6,188 per tonne.The correction is mainly the result of greater availability. In Ivory Coast, 2.14 million tonnes of cocoa had arrived at ports by 30 August, 19% more than a year earlier. Certified ICE stocks have also increased considerably, reaching their highest level in two years in early September. Chocolate manufacturer Barry Callebaut and food company Mondelez have also indicated that the market currently has sufficient stocks to absorb any production problems for the time being.New crop raises concernsBy contrast, the outlook for the 2026/27 season is deteriorating. Ghana stands out in particular. The Cocoa Marketing Company expects a crop of just 470,000 to 620,000 tonnes, compared with around 760,000 tonnes last season. Ageing trees, disease and pollination problems are weighing on production potential.The signals from Ivory Coast are also unfavourable. Pod development is lagging and early estimates point to a crop of around 1.8 million tonnes. That would be approximately 18% lower than the roughly 2.2 million tonnes produced in 2025/26. El Niño also remains a major source of uncertainty. Drier and warmer weather later in the season could strengthen the dry north-easterly to easterly Harmattan winds, putting additional stress on cocoa trees.As a result, the global balance is becoming noticeably tighter. Estimates vary, but almost all analysts expect the surplus to decline sharply. BMI, for example, expects the surplus to fall from 442,000 tonnes in 2025/26 to just 82,000 tonnes in 2026/27. StoneX puts it even lower, at around 25,000 tonnes.Volatility remains highThe cocoa market is therefore being shaped by two opposing factors. Ample physical availability and high stocks are limiting prices in the short term. At the same time, the expected surplus heading into 2026/27 is becoming much smaller. Further setbacks in West Africa could therefore quickly trigger another sharp price reaction.For now, a repeat of the extreme tightness seen in 2023/24 does not appear likely. More cocoa is available to the market, while growing production in countries including Ecuador and Brazil is also providing greater diversification of supply. However, with the surplus shrinking sharply and uncertainty surrounding the West African crop, cocoa prices remain highly sensitive to new crop and weather reports.