Cocoa prices experienced a notable rebound on Friday, recovering from 2.5-week lows as significant short covering emerged in the market ahead of a long holiday weekend. Both July ICE NY cocoa (CCN26) and July ICE London cocoa #7 (CAN26) settled higher, with US and UK markets slated for closure on Monday.
Specifically, July ICE NY cocoa closed up +29, marking a +0.77% increase, while July ICE London cocoa #7 saw a gain of +10, or +0.45%. This recovery follows a retreat in prices from 3.75-month highs posted just last Monday, as market sentiment had been influenced by an outlook for potentially abundant supplies.
Supply Dynamics and Price Pressures
Recent data has presented a mixed picture regarding cocoa supplies, contributing to price volatility. The Ivory Coast, a dominant global producer, recently boosted its cocoa delivery estimate for the 2025/26 season to 2.2 million metric tons (MMT), a significant increase from its previous projection of 1.8-1.9 MMT. This upward revision was attributed to favorable weather conditions and is generally considered a bearish factor for prices.
Cumulative data from the Ivory Coast further supported the notion of ample supplies, with farmers shipping 1.61 MMT of cocoa to ports in the current marketing year (October 1, 2025, through May 17, 2026), representing a +1.9% increase from the same period a year ago. Additionally, ICE cocoa inventories reached a 1.75-year high of 2,704,116 bags on Friday, signaling robust stock levels.
The International Cocoa Organization (ICCO) also contributed to the bearish supply outlook, raising its global 2024/25 cocoa surplus estimate on March 2 to 75,000 MT from 49,000 MT in November. This marks the first surplus in four years, with ICCO estimating global cocoa production in 2024/25 climbed by +8.4% year-over-year to 4.7 MMT.
Bullish Undercurrents and Demand Signals
Despite the recent bearish supply indicators, several factors continue to provide underlying support for cocoa prices. Concerns about the potential formation of an El Niño weather pattern have been a significant bullish driver. The US National Oceanic and Atmospheric Administration (NOAA) estimates an 82% probability of El Niño conditions emerging between May and July and persisting through the end of the year, with a 67% chance of a "Super El Niño." Such conditions could lead to warmer, drier weather in West Africa, potentially damaging cocoa production.
Early surveys for the 2026/27 West African cocoa crop also indicate a weak outlook for the main harvest, which begins in October, due to below-average cherelle formation on cocoa trees. Furthermore, the Ivory Coast itself has projected a decline in its 2025/26 cocoa production, forecasting a fall of -10.8% year-over-year to 1.65 MMT from 1.85 MMT in 2024/25.
Drought conditions in key producing regions remain a concern. Recent rainfall in West Africa has been insufficient to ease drought in the Ivory Coast and Ghana, with the African Flood and Drought Monitor reporting as of March 29 that drought conditions blanket more than half of the Ivory Coast and about two-thirds of Ghana.
Analyst firms have also adjusted their surplus estimates downwards. StoneX, on April 29, cut its 2026/27 global cocoa surplus estimate to 149,000 MT from a January forecast of 267,000 MT, citing risks to the West African crop from the expected El Niño. StoneX also reduced its 2025/26 global cocoa surplus forecast to 247,000 MT from 287,000 MT. Similarly, Rabobank cut its 2025/26 global cocoa surplus estimate to 250,000 MT from a November forecast of 328,000 MT.
Disruptions to global supply chains, such as the prolonged closure of the Strait of Hormuz, are also supportive of prices by reducing fertilizer supplies and boosting global shipping rates, insurance costs, and fuel prices, thereby increasing importers’ costs.
Mixed Signals in Global Demand and Regional Production
Consumer demand for chocolate presents a mixed picture. Recent earnings results from top chocolate makers Hershey and Mondelez International were better than expected, suggesting steady consumer chocolate demand despite high prices. However, Circana reported on April 14 that chocolate candy sales in North America in the 13 weeks ending March 22 fell 1.3% from the same period a year ago.
Regional cocoa grindings data also shows divergence. The National Confectioners Association reported that North American Q1 cocoa grindings fell -3.8% year-over-year to 106,087 MT. The European Cocoa Association reported an even steeper decline, with Q1 European cocoa grindings falling -7.8% year-over-year to 325,895 MT, marking the lowest Q1 in 17 years and exceeding expectations for a -6% decline. Conversely, the Cocoa Association of Asia reported an unexpected rise of +5.2% year-over-year in Q1 Asian cocoa grindings to 223,503 MT, significantly stronger than expectations of a -6.7% decline.
Further supply concerns stem from Nigeria, the world’s fifth-largest cocoa producer, where Bloomberg reported a -35% year-over-year fall in exports in March to 18,052 MT. Nigeria’s Cocoa Association projects a -11% year-over-year decline in Nigerian cocoa production for 2025/26, to 305,000 MT from a projected 344,000 MT for 2024/25.
Adding to the complex supply outlook, Ghana cut the official price it pays its cocoa farmers by nearly 30% for the 2025/26 growing season. The Ivory Coast also announced a significant 57% cut in cocoa farmer pay, which commenced with the mid-crop harvest this month. These cuts by the two largest global producers, which together account for more than half of the world’s cocoa, could impact future production incentives.
The cocoa market continues to navigate a complex interplay of supply and demand factors. While recent short covering provided a temporary lift, the underlying fundamentals remain a battle between potential supply increases from favorable weather in some regions and significant concerns over El Niño, drought, and reduced farmer incentives in West Africa, alongside mixed global demand signals.
