Cocoa Prices Surge on El Niño Concerns: Global Weather Risks Impact Markets

Global cocoa markets are currently pricing in heightened weather risks following the confirmed emergence of an El Niño weather pattern, driving cocoa futures to three-week highs. July ICE New York cocoa (CCN26) closed up +0.05% on Wednesday, while July ICE London cocoa (CAN26) saw a +0.16% increase. This rally is primarily attributed to growing concerns over adverse weather conditions anticipated in key West African producing regions.

An El Niño typically brings warmer, drier conditions to West Africa, leading to reduced soil moisture, stressing cocoa trees, and ultimately lowering yields. The Japan Meteorological Agency confirmed the formation of an El Niño weather pattern across the equatorial Pacific last week. Furthermore, the US National Oceanic and Atmospheric Administration (NOAA) estimates a 67% chance of a “Super El Niño” this year, potentially one of the strongest on record. These forecasts, combined with early surveys of the 2026/27 West African cocoa crop showing below-average cherelle formation, signal a weak outlook for the main harvest beginning in October.

The market impact of these developments is evident in a short-covering rally, exacerbated by funds holding excessively short positions. The latest Commitment of Traders (COT) report indicated that funds increased their net short positions in NY cocoa to 27,286 contracts, the most in over three years. Such a significant concentration of bearish bets often precedes sharp price reversals. Conversely, recent data showed that cumulative cocoa shipments to Ivorian ports were up 18.9% year-over-year in the current marketing year, suggesting signs of abundant supply. However, the Ivory Coast also recently projected a 10.8% year-over-year decline in its 2025/26 cocoa production, keeping long-term supply concerns alive. Additionally, the prolonged closure of the Strait of Hormuz is disrupting global cocoa supplies by reducing fertilizer access and increasing shipping costs, thereby supporting prices.

West Africa, particularly Côte d'Ivoire and Ghana, accounts for approximately two-thirds of the world's cocoa production, making the region crucial to global supply. The aging cocoa trees, prevalent diseases like the cacao swollen shoot virus, and unpredictable weather patterns due to climate change contribute to the inherent fragility of production in the region. These structural issues render the global supply chain highly susceptible to weather-related shocks. Nigeria, another significant producer, is also forecast to see an 11% drop in its 2025/26 cocoa output.

Analysts and market expectations suggest that upward pressure on cocoa prices may persist in the coming period. StoneX, for instance, cut its 2026/27 global cocoa surplus estimate from 267,000 metric tons in January to 149,000 metric tons, citing El Niño risks to the West African crop. The International Cocoa Organization (ICCO) also revised its 2024/25 surplus estimate downwards. Hein Schumacher, CEO of Barry Callebaut, a leading cocoa processor, stated that El Niño conditions could drive up cocoa bean prices but anticipated a less dramatic surge compared to recent years. On the demand side, Asian cocoa grindings unexpectedly rose, while North American and European grindings experienced declines.