Cocoa futures staged a notable recovery on Friday, erasing early losses to close with modest gains, primarily propelled by a significant weakening of the U.S. dollar. The dollar index ($DXY) declined to a 7-week low, a movement that spurred short covering in cocoa futures and provided crucial support to prices.
September ICE NY cocoa (CCU26) concluded the trading day up +6 points, marking a +0.10% increase, while September ICE London cocoa #7 (CAU26) also saw gains, closing up +4 points, or +0.09%. This rebound occurred despite initial downward pressure earlier in the session.
Dollar Weakness and Market Reaction
The depreciation of the dollar made dollar-denominated commodities, including cocoa, more attractive to holders of other currencies, thereby stimulating demand. This, coupled with short covering – the buying back of previously sold futures contracts to close out a position – was instrumental in reversing cocoa’s early slide. Traders who had bet on falling prices were prompted to buy as the dollar’s weakness shifted market sentiment.
Conflicting Supply Signals
The market navigated a complex array of supply indicators throughout the week. Initially, prices were pressured by signs of larger cocoa supplies from Ghana, the world’s second-largest producer. Ghana’s cocoa board reported on Wednesday that 750,000 metric tons (MT) of cocoa had been harvested for the 2025/26 season, which concludes at the end of this month. This figure represents a substantial +25.6% increase from the 597,000 MT recorded in the 2024/25 season. Furthermore, rising cocoa inventories added to the bearish sentiment, with ICE cocoa inventories reaching a 2-year high of 3,384,965 bags on Wednesday.
Cumulative data from the Ivory Coast, the world’s largest cocoa producer, also indicated robust shipments. As of August 2, 2026, farmers had shipped 2.11 MMT of cocoa to ports in the current marketing year (October 1, 2025, through August 2, 2026), marking a +20% increase from the same period a year ago. Bloomberg also reported on July 16 that Nigerian cocoa exports in June rose by +30% year-over-year to 18,922 MT, further suggesting ample global supplies.
Mixed Demand Picture
Cocoa demand presented a mixed picture in the second quarter. On the downside, the European Cocoa Association reported on July 16 that Q2 European cocoa grindings fell by -4.6% to 316,366 MT. This decline was larger than the -1.5% year-over-year expected and represented the lowest level for a second quarter in six years. However, this weakness was offset by stronger demand elsewhere. The National Confectioners Association reported an unexpected rise in Q2 North American cocoa grindings, up +7.7% year-over-year to 109,659 MT, significantly exceeding expectations of a -1% year-over-year decline. Similarly, Asian cocoa demand improved, with the Cocoa Association of Asia reporting a +25% year-over-year increase in Q2 Asian cocoa grindings to 224,646 MT, well above the anticipated +9% year-over-year growth.
Future Production Concerns Provide Underlying Support
Despite current supply increases, significant concerns regarding future production provided underlying medium-term support for cocoa prices. Last Friday, Ghana’s cocoa regulator, COCOBOD, projected a substantial drop in Ghana’s 2026/27 cocoa production, forecasting a range of 450,000 MT to 550,000 MT. This is a sharp reduction from the 750,000 MT projected for 2025/26, attributed to the combined effects of swollen shoot disease, aging cocoa farms, and the likelihood of adverse weather from the El Niño pattern.
The US Climate Prediction Center stated on July 8 that the El Niño weather pattern, which emerged last month, is likely to be one of the strongest in over 75 years. An El Niño typically brings warmer, drier conditions to West Africa, a critical cocoa-growing region, which can reduce soil moisture, stress cocoa trees, and lower yields.
Early surveys of the 2026/27 Ivory Coast cocoa crop also signal a weak outlook for the main harvest, which commences in September, due to below-average cherelle formation on cocoa trees. Initial assessments project an average of 1.8 MMT for the season, an -18% decrease from approximately 2.2 MMT in 2025/26, although a senior manager at Expana noted on July 23 that more recent surveys show a substantial improvement in cocoa pod counts.
Furthermore, the outlook for smaller cocoa supplies from Nigeria, the world’s fifth-largest cocoa producer, supports prices. Nigeria’s Cocoa Association projects that Nigerian cocoa production in 2025/26 will fall by -11% year-over-year to 305,000 MT, from a projected 344,000 MT for the 2024/25 crop year.
Global Surplus Estimates Revised Downward
Analysts have begun to revise global cocoa surplus estimates downward, reflecting these future production concerns. StoneX, for instance, cut its 2026/27 global cocoa surplus estimate last Wednesday to 25,000 MT from a forecast of 149,000 MT in April, citing risks to the West African cocoa crop from the expected El Niño. Similarly, Transgraph Consulting forecast on July 23 that the global cocoa surplus in 2026-2027 will shrink significantly to 80,000 MT from 415,000 MT in 2025-2026, primarily due to an expected decline in production to 4.87 MMT in 2026-2027 from 5.11 MMT in 2025-2026.
The interplay of immediate supply increases and robust demand in key regions, alongside significant long-term production concerns exacerbated by weather patterns and crop diseases, creates a volatile but fundamentally supported market for cocoa. The dollar’s recent weakness provided the immediate catalyst for Friday’s recovery, but the underlying narrative of tightening future supplies continues to shape price expectations.
