Is the cocoa market taking on a new tone?
- Cocoa prices rose significantly this week, driven by short-covering and the entry of new buyers amid supply concerns.
- El Niño remains the main risk factor, with the potential to affect the development of the 26/27 crop in West Africa by altering key weather patterns.
- The suspension of Ivory Coast 26/27 sales and the volume already traded reinforce the market’s caution regarding future availability.
- The combination of rising prices and changes in open interest suggests a strengthening of the bullish bias in the short term, even though the market is currently overbought and cautious.
- Demand is gaining relative importance, with expectations of a decline in grinding activity in the 25/26 cycle and greater attention being paid to second-quarter 2026 data to determine the market trend.
Is the cocoa market taking on a new tone?
Cocoa futures closed the week at 5,095 USD/t in New York and 3,820 GBP/t in London, posting weekly gains of 20% and 16%, respectively. This rally was driven primarily by the covering of short positions and the opening of new long positions, supported by supply-related news.
Weather remains one of the market’s key drivers. Recent fluctuations reflect uncertainties surrounding the potential impacts of El Niño, which could affect both weather conditions and production in major producing regions. In West Africa, the primary producing region, the phenomenon could alter key regional patterns, such as the West African monsoon and the Harmattan winds.
Considering the likely peak of the event and the crop calendar[LR1.1], the effects are expected to be concentrated between October and December, which could impact developing fruits at the start of the main 26/27 crop, affecting its conclusion, as well as the flowering that will give rise to the 26/27 mid-crop. This scenario is likely to put pressure on the December 2026 and March 2027 contracts.
CCSR/IRI ENSO Strength Categories (%, June, 2026)
Source: CCSR/IRI
In this context, on June 23, the Ivory Coast Coffee and Cocoa Council suspended sales of export contracts for the 26/27 crop while it assesses the potential impacts of El Niño on production. According to the council, the country has already sold approximately 1.150 million tons from the main 26/27 crop, a volume higher than the 850 thousand tons sold by mid-July of the previous year for the main 25/26 season, a fact that demands the market’s attention.
In addition, excessive rainfall and cloud cover in some regions over the past few weeks are heightening concerns regarding harvest pace and disease incidence in producing areas. A similar situation has been observed in Ghana, where rainfall has been above average since January and has recently intensified, which could also impact the country’s 26/27 crop.
Estimated cumulative rainfall for Ivory Coast’s cocoa-producing districts (mm)
Source: CPC Gadas, Hedgepoint
The combination of these factors, which could result in a slower start to the 26/27 season in the two main producing regions, helped support prices throughout the week. It is worth noting that both countries have brought forward the start of the crop to September (the crop usually begins in October), making any delays or initial problems even more critical.
Looking at the September 2026 contract, changes in open interest, combined with rising prices, suggest both short-covering and the entry of new buyers, reinforcing a more bullish bias in the short term. Despite this scenario, the Relative Strength Index in both markets remains at overbought levels, which could pave the way for consolidation or corrections in the coming days. In this regard, prices closed lower on June 26, giving back a small portion of the week’s gains in New York and London.
NY cocoa Sep 26 – RSI
Source: LSEG
London cocoa Sep 26 – RSI
Source: LSEG
Despite concerns regarding supply, it is worth noting that a key factor for the 26/27 crop balance will be demand. The current scenario differs from that observed in the 23/24 cycle, when supply was impacted by El Niño, among other factors, contributing to a significant drop in production. During that period, even in the face of this supply crunch, beans grinding had been growing since the 20/21 crop year. Consequently, for the 25/26 cycle, a decline in processing is expected, making the second-quarter 2026 results, to be released in mid-July, a period particularly important and potentially decisive for the tone of the cocoa market in the short and medium term, further increasing market caution
In Summary
Cocoa prices rose strongly this week, driven by technical factors and supply-related fundamentals, notably weather uncertainties linked to El Niño and concerns about the upcoming 26/27 crop in West Africa. The suspension of 26/27 sales by Ivory Coast and excessive rainfall in the region reinforced the short-term bullish bias. Despite this, technical indicators point to overbought conditions, suggesting possible corrections. In the medium term, in addition to supply, demand trends will take center stage, especially given expectations of a decline in processing volumes, in contrast to the scenario observed during the 23/24 crop.
Weekly Report — Cocoa
carolina.frança@hedgepointglobal.com
laleska.moda@hedgepointglobal.com
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