Volatility Persists in the Cocoa Market

Cocoa prices continue to fluctuate, reinforcing the high-volatility momentum in its market in the short to medium term. Over the past few weeks, the July beans contract has experienced significant volatility. During the week of May 19, it surged to a three-and-a-half-month high. This was followed by a series of price corrections, bringing values down to 10,076 USD/mt in New York and 6,612 GBP/mt in London. However, by the close of Thursday, June 5, prices rebounded, reaching 10,076 USD/mt in New York and 6,612 GBP/mt in London - setting a new recent high.

Among the factors influencing price dynamics, the market has been closely monitoring the weather in West Africa. In Ivory Coast and Ghana, rainfall has been above average in some producing regions in recent weeks, bringing some relief to supply expectations for the 24/25 mid-crop (April 25 to September 25) and the start of the 25/26 crop, should the rains continue. However, the cumulative precipitation since the beginning of the season (Oct 24 to Jun 25) remains below average for both countries.

It is worth noting that decline in bean quality being harvested in some regions –which experienced a period of drought earlier this year – remains a concern, as does the consistency of rainfall throughout June and July, which is important for good results in the next main season. Climate models predict average rainfall in the main cocoa-producing regions of West Africa for the coming days. This could support some degree of price stability, provided weather conditions remain favorable.

Nonetheless, several factors continue to support a bullish outlook. For example, current supply in Ivory Coast remains constrained. While port arrivals through June 1 were 7.69% higher year-over-year, they still lag 10.95% behind the five-year average. Additionally, since the beginning of the harvest, the pace of deliveries has noticeably slowed.

In this regard, given the progress of the current harvest and the possibility of a third consecutive year of reduced production (depending on rainfall in the coming weeks), the Ivory Coast's cocoa regulatory agency plans to limit contract sales for the next harvest (25/26) to 1.3 million tons, compared to an average of 1.7 million. Additionally, about half of the contracts have already been traded to date. As a result, the main supplier has limited availability remaining from the current crop, and its role in next season’s global trade flows is uncertain, highly dependent on weather conditions. This further reinforces the bullish narrative.

Given the current scenario, the spread between July and September contracts in both New York and London has widened, signaling possible short-term support for prices. However, it is worth noting that if there is regular rainfall in West African producing regions in the coming weeks, the supply outlook for the 25/26 harvest is likely to ease tensions gradually, as well as pressure on cocoa prices. In addition, production expectations for other origins, such as Ecuador, remain positive.

Cocoa prices remain volatile. The current market dynamics have been influenced by weather conditions in West Africa, with recent above-average rainfall in some producing regions, which may ease concerns about the 2025/26 season — provided that the weather pattern continues. However, the cumulative precipitation for the current 24/25 season is still below the historical average, and the quality of the harvested beans remains a concern.

The main cocoa regulatory body in Ivory Coast intends to limit exports for the 25/26 crop, given the risk of a third harvest with weaker production. As a result, the spread between July and September contracts has widened, signaling possible support for prices in the short term. However, if the regular rains expected in some regions of West Africa materialize and other origins such as Ecuador continue to perform well, this support may weaken in the medium term.