Cocoa markets were just beginning to see a glimmer of hope for rebalancing supply and demand, but the supply side is once again flashing red.
New York cocoa futures have doubled in price since early March, approaching the $6,000 per tonne mark again. A recent report from Jefferies Financial Group Inc. warns that the world's two largest cocoa producers, Ivory Coast and Ghana, are facing a wave of abnormal weather, with crop development for the new season significantly weaker than normal. If the weather continues to deteriorate, the global cocoa market could quickly shift from a brief surplus back to a tight supply situation.
Market Concerns Are Well-Founded
These market concerns are not unfounded. The latest data from the International Cocoa Organization (ICCO) shows that the global cocoa market for the 2024/25 season is still projected to record a surplus of about 48,000 tonnes, but this is a significant reduction from the previously forecast 75,000 tonnes. At the same time, the global stocks-to-grindings ratio, while improved from the previous season, remains below the historical average. This indicates that the market's buffer to absorb supply shocks is still very limited.
West Africa Faces a "Perfect Storm"
Jefferies Financial Group Inc. analyst Scott Marks points out that the West African growing region is currently experiencing an extremely unusual combination of weather patterns. Since March this year, average temperatures in Ivory Coast and Ghana have remained about 2 degrees Fahrenheit below the five-year average. However, after entering June, rainfall has been significantly above normal: Ivory Coast's rainfall is about 46% above the historical average, while Ghana's is about 52% higher.
This persistently cool and humid weather, while alleviating heat stress, has created an ideal environment for fungal diseases like Black Pod Disease and Brown Rot. These diseases are among the primary factors affecting cocoa yields and can cause a large number of immature pods to rot and fall off.
What worries the market more is that signs of reduced production for the new season are already emerging. Citing preliminary industry surveys, Jefferies Financial Group Inc. reports that flower and pod formation for the Ivory Coast's 2026/27 cocoa crop are below normal levels. The industry has already lowered its production forecast for the new season to between 1.7 and 1.8 million tonnes, a drop of about 18% from the approximately 2.2 million tonnes produced in the 2025/26 season.
Global Supply-Demand Recovery Remains Fragile
After two consecutive years of severe supply shortages, the global cocoa market was gradually moving towards a balance.
The ICCO's latest report from May projected a surplus of about 48,000 tonnes for the 2024/25 global cocoa market. However, compared to the previously forecast surplus of 75,000 tonnes, this figure has been significantly reduced, indicating that the recovery in supply is weaker than expected.
Concurrently, while the global cocoa stocks-to-grindings ratio has improved compared to the 2023/24 season, it remains notably below the historical average. This means downstream inventories are still low, and prices remain prone to sharp volatility if new production cuts occur in the main growing regions.
El Niño Poses the Next Potential Risk
Beyond the immediate threat of heavy rainfall, the market is already starting to focus on another potential danger.
Jefferies Financial Group Inc. notes that the possibility of an El Niño forming later this year is being closely watched by traders. If El Niño develops, it could bring hot, dry weather to West Africa, creating a rapid switch from the current wet conditions. This would further impact cocoa tree flowering, fruit set, and pod maturation.
This implies that even if the current disease risks triggered by excessive rainfall ease, the subsequent arrival of dry weather could still weaken the new season's output. Such a scenario would plunge global cocoa supply back into tightness and continue to support cocoa prices at elevated levels.
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