Cocoa prices are extending their recovery as concerns over dry conditions in West Africa begin to offset evidence of stronger current-season supply. December NY cocoa rose 29 points to 5,619, while December London cocoa #7 gained 22 points to £4,191, marking a fifth consecutive higher session for both markets.

The immediate focus is shifting toward the weather outlook for the Ivory Coast, where forecasts for below-normal rainfall could stress cocoa trees and reduce production potential for the 2026/27 crop. At the same time, the market continues to contend with rising inventories and strong current-season arrivals, creating a clear divide between improving near-term supply and growing concerns about the next crop.

That tension is likely to keep cocoa prices highly sensitive to West African weather developments, crop assessments and evidence of demand recovery.

Market Snapshot

Current Cocoa Price Action

Cocoa has recovered for five consecutive sessions after falling to approximately 1.75-month lows earlier in the month.

The rebound is being driven primarily by concerns over the next West African crop rather than a deterioration in current physical supply.

The market had previously come under pressure as evidence of strong Ivory Coast production increased available cocoa. The latest weather forecasts are now encouraging traders to look beyond the current crop and assess whether the 2026/27 harvest can maintain recent production levels.

This creates a more balanced short-term environment, with the market caught between rising inventories and potential production losses ahead.

Ivory Coast Production Remains Strong

The Ivory Coast remains the most important factor for global cocoa supply.

The country’s cocoa regulator reported that farmers harvested approximately 2.06 MMT between June 2025 and June 2026, an increase of around 30% from the previous season’s 1.58 MMT.

Shipments have also remained strong. Cumulative shipments to ports during the international cocoa marketing year through September 20 reached approximately 2.16 MMT, up 18.7% year over year.

This provides substantial near-term supply and helps explain why cocoa prices were under pressure earlier in the month.

However, shipment data need to be interpreted carefully because the Ivory Coast has moved its own marketing-year start date forward to September 1.

Early deliveries under the new Ivory Coast marketing year have been considerably weaker, providing an additional reason for traders to monitor the transition into the new crop.

Dry Weather Threatens the 2026/27 Crop

The next major market driver is increasingly the weather.

Forecasts for below-normal rainfall in the Ivory Coast over the coming week could reduce soil moisture and place additional stress on developing cocoa trees.

This is particularly important because early assessments of the 2026/27 crop have already pointed toward weaker pod development.

Initial estimates place Ivory Coast production for the new season around 1.8 MMT, approximately 18% below the roughly 2.2 MMT produced during 2025/26.

If dry conditions persist, the market could see further downward revisions to production expectations.

Crop Quality Remains a Concern

Weather is also affecting crop quality.

Cloudy conditions and limited sunshine across parts of the Ivory Coast and Ghana have created conditions favourable for black pod disease, which can reduce bean quality and potentially lower usable production.

The combination of disease pressure, poor pod development and potential dryness creates a significant risk to the next crop even if total production remains relatively high.

Ghana Production Outlook Weakens

Ghana provides another important source of medium-term supply risk.

The country’s cocoa regulator has estimated 2026/27 production at approximately 650,000 MT, down from 750,000 MT during the previous season.

Other projections are considerably more cautious. Ghana’s cocoa regulator has previously warned that production could fall into a range of 450,000 to 550,000 MT, reflecting swollen shoot disease, aging farms and potential adverse weather.

The current season, however, remains strong. Ghana has reported approximately 750,000 MT harvested during 2025/26, up around 25.6% from the previous season.

This means the market is dealing with strong current supply while simultaneously pricing a potentially weaker next crop.

Rising ICE Inventories Create Near-Term Pressure

Cocoa inventories remain one of the clearest bearish factors.

ICE-monitored cocoa stocks recently climbed to approximately 3.44 million bags, the highest level in around 2.25 years.

Higher exchange inventories indicate that physical cocoa is becoming more readily available within the delivery system.

This could limit the upside from weather concerns unless traders begin to see evidence that the additional supply is being absorbed by processors and chocolate manufacturers.

The inventory trend therefore remains an important counterweight to the bullish crop-risk narrative.

Global Supply Balance Is Tightening

The longer-term global balance is becoming less bearish.

StoneX has reduced its projected 2026/27 global cocoa surplus to approximately 25,000 MT, from an earlier estimate of 149,000 MT.

Other forecasts also point toward a substantially smaller surplus, with global production expected to decline from approximately 5.11 MMT to 4.87 MMT.

This would leave the global market much closer to balance than during the current season.

A smaller surplus would make the market more sensitive to even moderate production disruptions because there would be less supply available to absorb crop losses.

El Niño Adds a Longer-Term Weather Risk

The potential return of strong El Niño conditions remains an important medium-term consideration.

El Niño can produce warmer and drier conditions across West Africa, reducing soil moisture and placing stress on cocoa trees.

If this weather pattern persists through important stages of the 2026/27 crop, the current production forecasts could prove too optimistic.

The market therefore has a growing weather premium, although the size of that premium will depend on whether actual crop conditions deteriorate rather than simply on the existence of an El Niño forecast.

Cocoa Demand Remains Mixed

Demand signals are not moving uniformly across major processing regions.

European cocoa grindings fell 4.6% year over year to 316,366 MT in Q2, marking the lowest second-quarter level in six years.

North American grindings provided a more positive signal, rising 7.7% year over year to 109,659 MT, significantly stronger than expectations.

Asian demand was stronger still, with Q2 grindings increasing approximately 25% year over year to 224,646 MT.

The regional divergence means that the demand outlook remains difficult to assess from a single market indicator.

Stronger Asian and North American processing could help absorb available supply, while weaker European demand could continue to limit the pace of inventory drawdowns.

Bullish Sentiment

1. Ivory Coast Weather Risk
Below-normal rainfall could stress cocoa trees and reduce 2026/27 production.

2. Lower Ivory Coast Crop Potential
Early assessments point toward production around 1.8 MMT, potentially 18% below the previous season.

3. Ghana Production Risk
Disease, aging farms and adverse weather could significantly reduce Ghana’s next crop.

4. Narrowing Global Surplus
Several forecasts now point toward a global market close to balance in 2026/27.

5. El Niño Risk
A strong El Niño could produce warmer and drier conditions across West Africa and reduce yields.

6. Improving Asian and North American Demand
Strong Q2 grindings in Asia and North America provide evidence that demand remains resilient in important consuming regions.

Bearish Sentiment

1. Rising ICE Inventories
Exchange inventories have reached approximately 3.44 million bags, the highest level in around 2.25 years.

2. Strong Ivory Coast Current-Season Production
Harvests increased approximately 30% year over year to 2.06 MMT.

3. Strong Ivory Coast Shipments
International marketing-year shipments are up around 18.7% year over year.

4. Global Market Still in Surplus
Even though forecasts are narrowing, the 2026/27 market is currently still expected to maintain a small surplus in several estimates.

5. Weak European Processing Demand
European Q2 grindings fell 4.6% year over year, indicating continued pressure on consumption in a major cocoa-processing region.

6. Strong Ghana Current Crop
Ghana’s 2025/26 harvest reached approximately 750,000 MT, substantially above the previous season.

Price Forecast: What Traders Are Watching

The cocoa market is entering a more uncertain phase after the recent recovery.

In the near term, rising ICE inventories and strong Ivory Coast production could limit the upside. However, the market is increasingly looking beyond current availability toward the 2026/27 crop.

A sustained period of dry weather in the Ivory Coast would increase the probability of lower production and could encourage traders to price a larger weather premium.

Conversely, if rainfall improves and crop conditions stabilise, the recent recovery could lose momentum as inventories remain elevated.

The key signal for the coming sessions will therefore be whether weather-driven crop risk begins to outweigh the market’s current surplus and inventory position.

Supply Outlook

Near-term cocoa supply remains relatively comfortable because the Ivory Coast and Ghana have produced significantly more cocoa during the current season.

However, the forward supply picture is becoming tighter.

Lower expected production in the Ivory Coast and Ghana, combined with disease pressure and potential El Niño-related weather disruption, could significantly reduce the amount of cocoa available during the next crop cycle.

The market is therefore moving from a period of abundant current-season supply toward a potentially more constrained 2026/27 environment.

Demand Outlook

Demand remains mixed rather than uniformly weak.

European processing continues to show signs of pressure, while North American and Asian grindings indicate stronger consumption in other major markets.

The direction of global demand will become increasingly important if production declines. A smaller crop combined with stable or improving processing demand could rapidly reduce the current surplus.

Conversely, continued weakness in European consumption could help prevent inventories from tightening too quickly.

Market Outlook for the Coming Sessions

Cocoa traders are likely to focus heavily on Ivory Coast rainfall, crop development and inventory trends.

The five-session recovery shows that weather risk is already returning to the market’s focus after the recent sell-off.

The immediate resistance to further gains comes from strong current-season production and elevated ICE inventories. The longer-term support comes from deteriorating early crop assessments, lower Ghana production expectations and the possibility of El Niño-related weather disruption.

The market’s direction will ultimately depend on whether the developing 2026/27 crop can deliver sufficient supply to offset the potential decline in West African production.

Currency Hedger View

Cocoa’s international pricing makes currency movements an important part of the physical trading equation.

For cocoa producers, processors, exporters and manufacturers, changes in the US dollar, West African currencies, British pound and euro can materially affect the effective value of international transactions.

The current cocoa market also demonstrates how currency exposure can interact with commodity fundamentals. Weather disruption can lift cocoa prices, while changes in interest rates, inflation, energy markets and the US dollar can simultaneously alter the cost of sourcing and selling physical cocoa.

A Currency Hedger account provides access to international currency exchange and payment solutions while helping businesses understand the wider forces influencing currency markets.

Explore Currency Hedger

Analysis Louis Roche – Today Markets

Cocoa is currently balancing strong current-season supply against a potentially tighter 2026/27 crop outlook.

The recent recovery reflects growing concern over Ivory Coast weather and early signs of weaker crop development, but elevated ICE inventories and strong current-season shipments remain important constraints on the upside.

The critical issue for the coming weeks will be whether the expected decline in West African production becomes sufficiently large to absorb existing inventories and offset the current supply surplus.

For now, traders are watching the transition from abundant current-season supply toward potentially tighter future availability, with rainfall, crop quality, inventories and regional processing demand likely to determine the next major move.

Louis Roche – Today Markets

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