Cocoa futures experienced a significant upward movement on Monday, with July ICE NY cocoa (CCN26) closing up +103 points, or 2.73%, and July ICE London cocoa #7 (CAN26) settling higher by +86 points, or 2.98%. This rally propelled cocoa prices to their highest level in 1.5 weeks, driven primarily by a weakening U.S. dollar that ignited a wave of short-covering among traders.
Dollar Decline Supports Commodity Prices
The U.S. dollar index ($DXY) fell to a one-week low on Monday, a development that typically provides a supportive backdrop for most commodity prices, including cocoa. As the dollar weakens, commodities priced in dollars become relatively cheaper for holders of other currencies, potentially boosting demand and encouraging investment.
Fund Positioning and Short-Covering Dynamics
Analysts point to an excessively short position held by funds as a key factor exacerbating the short-covering rally. The latest Commitment of Traders (COT) report, released last Friday for the week ending June 9, revealed that funds had increased their net short positions in NY cocoa by 6,175 contracts, reaching a total of 27,286 net-short positions. This marks the most bearish fund positioning in cocoa futures in over three years, creating a fertile ground for a short-covering squeeze when market sentiment shifts.
Conflicting Supply and Demand Signals
The recent price action occurred against a backdrop of mixed fundamental signals. Last week, cocoa prices had dipped to three-week lows, influenced by reports of abundant supply. The Ivory Coast, the world’s largest cocoa producer, revised its estimate for cocoa reaching its ports upward by more than 260,000 metric tons for the current season. Cumulative data from the Ivory Coast indicated that farmers had shipped 1.95 million metric tons of cocoa to ports between October 1, 2025, and June 7, 2026, representing an 18.9% increase compared to the same period a year prior. However, the Ivory Coast’s own production forecast for 2025/26 projected a 10.8% year-over-year decline to 1.65 million metric tons from 1.85 million metric tons in 2024/25.
Weather Concerns and Crop Outlook
Underlying medium-term support for cocoa prices stems from weather concerns. The confirmation of an El Niño weather pattern by Japan’s Meteorological Agency last Wednesday has raised fears of warmer and drier conditions in West Africa, which could negatively impact cocoa production. The U.S. National Oceanic and Atmospheric Administration (NOAA) has estimated a 67% probability of a “Super El Niño” this year, potentially one of the strongest on record. Furthermore, early surveys of the 2026/27 West African cocoa crop suggest below-average cherelle formation on cocoa trees, signaling a potentially weak outlook for the main harvest commencing in October.
Inventory Levels and Supply Chain Disruptions
Rising cocoa inventories also present a bearish factor for prices. ICE cocoa inventories reached a 1.75-year high of 2,929,074 bags on June 5, and remained elevated at 2,917,793 bags by Friday. Conversely, the prolonged closure of the Strait of Hormuz is contributing to price support by disrupting global cocoa supplies. This disruption increases fertilizer costs, boosts global shipping rates and insurance premiums, and raises fuel prices, all of which elevate the cost for cocoa importers.
Global Demand Weakness and Regional Variations
Global cocoa demand remains a bearish influence. In North America, Q1 cocoa grindings reported by the National Confectioners Association fell 3.8% year-over-year to 106,087 metric tons. Similarly, European cocoa grindings for Q1 declined by 7.8% year-over-year to 325,895 metric tons, marking the lowest Q1 figure in 17 years and a steeper drop than the anticipated 6% decrease. In contrast, Q1 Asian cocoa grindings unexpectedly rose 5.2% year-over-year to 223,503 metric tons, defying expectations of a 6.7% decline.
African Production Challenges
Smaller cocoa supplies from Nigeria, the world’s fifth-largest producer, are providing support to prices. Nigerian cocoa exports in April decreased by 20% year-over-year to 14,921 metric tons, according to Bloomberg reports on May 28. Nigeria’s Cocoa Association projects a 11% year-over-year fall in production for 2025/26 to 305,000 metric tons. In February, Ghana reduced the official price paid to its cocoa farmers by nearly 30% for the 2025/26 growing season. The Ivory Coast followed suit in March, announcing a 57% cut in farmers’ pay effective for the mid-crop harvest. Given that the Ivory Coast and Ghana collectively produce over half of the world’s cocoa, these producer price adjustments can significantly influence global supply dynamics.
Surplus Forecasts Revised Downward
The outlook for a smaller global cocoa surplus is a supportive factor for prices. On April 29, StoneX revised its 2026/27 global cocoa surplus estimate downward to 149,000 metric tons from a January forecast of 267,000 metric tons, citing risks to the West African crop from the anticipated El Niño event. StoneX also lowered its 2025/26 global cocoa surplus forecast to 247,000 metric tons from a January estimate of 287,000 metric tons.
The interplay of a weaker dollar, significant fund short positioning, and ongoing concerns over weather patterns and production in key African growing regions have created a volatile but ultimately bullish environment for cocoa futures in the short term. While abundant supply data and weak demand in some regions persist, the immediate catalyst for Monday’s rally was the dollar’s decline, triggering essential short-covering activity that pushed prices to multi-week highs.
