The cocoa market combines weather sensitivity and technical movements

Cocoa futures closed the week of May 29 at 3,923 USD/t in New York and 2,975 GBP/t in London. On a monthly basis, contracts closed May with a 12.3% gain in New York and a 13.5% gain in London. Despite comments about a potentially larger crop in Ivory Coast and concerns regarding the beans ’s quality in West Africa, there have been no significant changes in market fundamentals to date.

In this regard, recent market movements have been driven primarily by the macroeconomic landscape, amid the unfolding conflict between the U.S. and Iran, as well as technical factors. Among the main drivers are the covering of short positions by speculative funds, technical buying following the break of resistance levels, and position adjustments. Thus, although the trend remains bearish given expectations of a surplus in the current cycle, the cocoa market remains structurally sensitive, and any shift in sentiment could amplify volatility, even within a bearish trend.

In this context, the weather remains a key factor. In Ivory Coast, the leading producer of cocoa beans, cumulative rainfall remains above last year’s levels and close to the historical average. In Ghana, this indicator is also above average and has already reached new highs, which is positive for the crop but requires attention regarding the progress of the season and the incidence of diseases.

Despite this, the forecast for the coming days indicates below-average rainfall in parts of West Africa. Considering the crop calendar, the crop is in a critical phase, corresponding to the flowering that will give rise to the main 26/27 season, which begins in October. Thus, a prolonged period of lower rainfall throughout June could affect crop development and provide additional support for technical market movements.

Still on the weather front, the sector remains attentive to the evolution of El Niño. NOAA has raised the probability of the phenomenon forming between May and July to 82%, with the possibility of it persisting throughout the winter of 2026/27 in the Northern Hemisphere, or summer in the Southern Hemisphere. Sea surface temperatures in the Niño 3.4 region have also risen significantly in recent months, with projections indicating the index will exceed 1.5°C and even reach 2°C starting in September, signaling a strong or very strong event.

In the main cocoa-producing regions, the potential effects of El Niño vary depending on intensity and location. The phenomenon may lead to drier conditions in West and Central Africa, Central America, and northern Brazil, while it tends to increase rainfall in Peru, Ecuador, and parts of Africa. Regarding temperature, heat waves may become more frequent in South America and Africa. In some regions, especially in West Africa, the response to El Niño is not direct and may be modulated by regional factors, such as the West African Monsoon and the Harmattan winds.

Thus, the impacts of El Niño are not uniform and depend on the intensity of the event, the timing of its occurrence within the production cycle, and its interaction with critical phases, such as flowering and fruit development. Consequently, the effects can vary significantly between regions and harvests, reinforcing the need for continuous monitoring of weather conditions and crops.

Thus, although recent price movements are predominantly technical, climatic factors remain capable of providing additional support to the market. Cocoa futures contracts closed lower on Friday, May 29, and may test the support zone at 3,925 USD/t in New York and 2,986 GBP/t in London, levels that, if breached, could lead to further losses, especially against a backdrop of expectations for a global surplus and high stocks in certified warehouses in New York. On the other hand, if support holds, there is potential for technical rebounds and corrective movements in the short term, albeit limited by this more bearish backdrop of a partial recovery in supply .

The cocoa market remains under pressure from technical factors and a bearish backdrop associated with expectations of a global surplus and high stocks in New York, but it remains sensitive to weather changes. Current conditions in West Africa are favorable, although there is a risk of below-average rainfall during a critical period for the development of the upcoming 2026/27 crop. At the same time, the possible formation of an El Niño adds uncertainty, as its effects vary by region. In this context, even with a bearish trend, the market may experience volatility and corrective movements in the short term.