Drought in Ivory Coast pushes cocoa prices higher again

The cocoa market is showing signs of recovery following the sharp price decline in September. Concerns about the new crop in Ivory Coast are lending support to the futures market. In particular, persistent dry weather in the world's largest cocoa-producing country is causing concern. At the same time, the market is still contending with relatively ample supplies from the previous season and weak demand.The turnaround in the futures market is clearly visible. At the end of September, cocoa in London was still trading at £4,017 per tonne, while New York stood at $5,367 per tonne. On Monday 5 October, London rose by 3.4% to £4,382 per tonne. New York gained 3.5% to reach $5,867 per tonne. This has interrupted the downward trend for now, although there is not yet any convincing sign of a sustained reversal.The market is caught between two opposing forces. Ample supplies from the 2025/26 season and weak demand are weighing on prices. At the end of September, traders were still pointing out that the market was struggling to absorb the large global surplus. At the same time, the outlook for the 2026/27 crop is deteriorating due to weather conditions in West Africa.Ivory Coast main crop set to be significantly smallerThe situation in Ivory Coast is creating particular uncertainty. A Reuters survey of farmers, exporters, cooperatives and buyers suggests that the Ivorian main crop could be around 17% smaller this season. Key growing regions have experienced excessively dry conditions since July. This has hampered the development of flowers and cocoa pods. In addition, growers are using fewer fertilisers and crop protection products because of their high cost.Exporters now estimate the main crop at around 1.25 million tonnes, compared with 1.5 million tonnes last season. Even if sufficient rain arrives in October, market participants believe production of more than 1.4 million tonnes will be difficult to achieve. Any rain that falls now is likely to benefit the mid-crop in particular.Attention is therefore increasingly shifting towards the mid-crop. If dry conditions persist throughout October, the second half of the main crop could also be affected. Weather developments over the coming weeks will therefore be an important factor in price formation.Arrivals remain well behindInitial physical arrival figures also point to a slow start. Only 18,000 tonnes of cocoa arrived at Ivorian ports last week. One exporter expects weekly deliveries of between 20,000 and 25,000 tonnes during October. By comparison, the average in October last year was around 71,300 tonnes per week. The gap is substantial and could contribute to a higher risk premium.Weather risks are also emerging outside Ivory Coast. At the end of September, World Weather warned that drought in south-western Ghana was beginning to threaten yields. Indonesia is also experiencing dry conditions.Demand remains weakNevertheless, it is still too early to speak of a structurally tight cocoa market. Current stocks and the surplus from 2025/26 provide a buffer. Demand also remains weak following the extremely high cocoa prices of recent years. It was precisely this combination that previously drove futures prices sharply lower.Speculative market participants also remain cautious. Cocoa speculators on ICE held a net short position of 26,137 contracts at the end of September. That position was reduced by just 190 contracts in the week to 29 September. The recent price rise therefore does not yet indicate that financial investors are positioning en masse for a further increase in prices.