Contributor: Currency Hedger
Market Analysis: Louis Roche, Today Markets

Cocoa futures are showing mixed but slightly positive price action as concerns over heavy rainfall in the Ivory Coast compete with evidence of rising inventories and pressure on global chocolate demand. December New York cocoa advanced 0.19%, while December London cocoa gained 0.78% in the latest session.

Heavy rain across the Ivory Coast is reportedly restricting farmers’ access to cocoa plantations, damaging transport infrastructure and slowing deliveries as the new harvest begins. These disruptions are raising concerns about the timing and quality of incoming supplies. However, a stronger US dollar and increasing ICE warehouse inventories continue to limit the market’s recovery.

The wider outlook is becoming increasingly dependent on the condition of the 2026/27 West African crop. Early assessments point to weaker pod development in the Ivory Coast and lower production expectations in Ghana, while a potential strong El Niño could create further weather risks. Against this, recent production growth, substantial inventories and uneven processing demand suggest that any sustained rally will require clearer evidence of a tightening supply balance.

Market Snapshot

Market indicator	Latest supplied data
December New York cocoa	+0.19%
December London cocoa	+0.78%
ICE cocoa inventories	3.56 million bags
Ivory Coast shipments	2.18 million tonnes
Ivory Coast shipment growth	+19.8% year on year
Ivory Coast 2026/27 crop estimate	Around 1.8 million tonnes
Ghana 2026/27 crop estimate	Lower than the previous season
European Q2 grindings	-4.6% year on year
North American Q2 grindings	+7.7% year on year
Asian Q2 grindings	+25% year on year
Near-term market bias	Neutral to cautiously bullish on crop risks

Figures reflect the supplied source material. Crop projections differ between organisations, and inventory, shipment and production figures may cover different reporting periods.

1. Heavy Rainfall Threatens Harvest Progress in the Ivory Coast

The Ivory Coast remains the most important factor in the near-term cocoa outlook. Heavy rainfall has reportedly damaged roads and bridges, restricted access to plantations and slowed the movement of cocoa beans towards export ports.

These disruptions are arriving as the main harvest begins, creating uncertainty over how quickly new supplies will reach the market. Even if the eventual crop remains substantial, delays in harvesting and transportation can tighten near-term availability and support futures prices.

Rainfall can also affect bean quality. Prolonged cloudy and wet conditions reduce sunshine and can encourage black pod disease, potentially lowering the proportion of marketable cocoa beans. If these problems spread across major growing areas, the impact could extend beyond delivery delays to affect usable production.

However, the market needs to distinguish logistical disruption from a genuine reduction in the size of the crop. If transport conditions improve and harvesting accelerates, some of the current supply premium could fade. More persistent rainfall, disease and poor pod development would present a more durable bullish signal.

2. Rising ICE Inventories Limit the Recovery

A significant counterweight to the weather-driven rally is the increase in exchange-monitored cocoa inventories. ICE cocoa stocks reportedly reached approximately 3.56 million bags, their highest level in around two and a quarter years.

Rising inventories can indicate that available supplies are more comfortable than the market previously anticipated. They can also reduce the urgency among buyers to secure additional volumes, particularly when demand from chocolate manufacturers is under pressure.

The inventory trend therefore presents a challenge for cocoa bulls. Even if the new West African crop encounters difficulties, prices may struggle to sustain a strong advance while exchange stocks continue to accumulate.

The direction of inventories over the coming weeks will be important. A sustained decline alongside weaker harvest estimates would strengthen the case for tightening availability. Further stock increases would suggest that current supply is sufficient to offset at least some of the emerging crop risks.

3. Strong Previous Output Complicates the Supply Outlook

Recent production and shipment data highlight why the market remains divided.

Cumulative Ivory Coast shipments were reported at 2.18 million tonnes for the cited marketing-year period, an increase of 19.8% year on year. The country’s cocoa regulator also reported that output harvested over the June 2025–June 2026 period rose by approximately 30% to 2.06 million tonnes.

These figures point to a strong previous production cycle and help explain why cocoa has faced pressure despite concerns about the next harvest.

The current outlook, however, may be different. Early assessments of the Ivory Coast’s 2026/27 crop indicate below-average cherelle formation, poor pod development and an estimated harvest of around 1.8 million tonnes, compared with approximately 2.2 million tonnes in the previous season.

This would represent a substantial reduction if confirmed. Nevertheless, early-season crop assessments are not final production results. Weather conditions can change, and estimates will need to be tested against subsequent field surveys, harvesting progress and actual arrivals.

For prices, the critical question is whether the expected decline in the next crop will be large enough to offset the stronger supply carried over from the previous season.

4. Ghana’s Production Risks Add to West African Uncertainty

Ghana, the world’s second-largest cocoa producer, faces its own production challenges. The supplied forecasts point to a lower 2026/27 crop, with estimates reflecting the effects of swollen shoot disease, ageing cocoa trees and potentially adverse weather.

One forecast places Ghanaian production at approximately 650,000 tonnes, down from 750,000 tonnes in the previous season. Ghana’s cocoa regulator has also indicated a more cautious range of 450,000–550,000 tonnes, reflecting the possibility of more severe constraints.

These estimates are not identical and should not be treated as a confirmed outcome. Their common implication, however, is that Ghana’s next crop may be materially smaller than the previous one.

The impact on global prices will depend on how much production is ultimately lost and whether other producing countries can compensate. If both Ghana and the Ivory Coast experience significant declines at the same time, the combined effect could materially tighten global supply.

Conversely, if final production exceeds the more pessimistic forecasts, cocoa prices could face renewed pressure, particularly while inventories remain elevated.

5. El Niño Could Create a Medium-Term Supply Risk

The possibility of a strong El Niño adds another layer of uncertainty. This weather pattern can alter temperature and rainfall across West Africa, where cocoa trees are sensitive to changes in soil moisture, heat and growing conditions.

Warmer and drier conditions can place cocoa trees under stress, weaken pod development and reduce yields. If the expected weather pattern persists through critical stages of the growing cycle, it could reinforce existing concerns about the 2026/27 harvest.

The timing and severity of the effects remain uncertain. El Niño does not guarantee a production decline, and its impact varies by location and season. Traders should therefore look for confirmation in rainfall data, soil conditions, disease reports and crop assessments rather than treating the weather forecast alone as proof of a shortage.

If conditions deteriorate and production estimates are cut further, the market could begin pricing in a tighter global balance. If weather impacts prove less severe than expected, the existing inventory overhang could regain influence.

6. Global Cocoa Balance Forecasts Point to a Narrower Surplus

Supply projections from market analysts suggest that the global cocoa balance could become tighter in 2026/27.

StoneX has reduced its forecast global surplus for the season to approximately 25,000 tonnes, while Transgraph Consulting has projected a surplus of around 80,000 tonnes, down from an estimated 415,000 tonnes in 2025/26.

Although both forecasts still indicate a surplus, the anticipated reduction is significant. A smaller surplus leaves the market more exposed to unexpected crop losses, particularly if weather problems affect the Ivory Coast and Ghana simultaneously.

The distinction between a surplus and a deficit is important. A narrowing surplus can support prices, but it does not necessarily mean that the market is already experiencing a physical shortage. The effect on prices will depend on inventory availability, demand and whether actual production tracks the more cautious projections.

For the coming sessions, further downward revisions to crop estimates could strengthen the bullish case. Stable or improving forecasts, combined with rising inventories, would make it harder for cocoa to establish a sustained recovery.

7. Cocoa Demand Remains Uneven

Demand is another key variable. High cocoa costs have placed pressure on manufacturers, and reports of losses linked to cocoa positions at major processors suggest that passing higher input costs through to customers has not always been straightforward.

Regional processing data offer a mixed picture:

• Europe: Q2 cocoa grindings fell 4.6% year on year to 316,366 tonnes, marking a weak second quarter.
• North America: Q2 grindings increased 7.7% year on year to 109,659 tonnes, outperforming expectations.
• Asia: Q2 grindings rose 25% year on year to 224,646 tonnes, also exceeding expectations.

The regional differences suggest that demand cannot be described as uniformly weak or strong. European processing activity points to continued pressure, while North American and Asian figures provide some reassurance.

If elevated prices continue to constrain chocolate manufacturers and consumers, demand destruction could offset part of the impact from lower production. Conversely, stronger processing data and improved buying interest would make a smaller crop more consequential for the global balance.

Technical Outlook: Cocoa Futures

The latest session’s gains suggest that weather concerns are providing support, but the relatively modest advance in New York cocoa indicates that the market remains constrained by opposing fundamentals. London cocoa’s stronger percentage gain shows a firmer session, although one trading session is insufficient to establish a sustained trend.

The supplied data do not provide verified current chart levels for support and resistance. The technical outlook should therefore focus on price follow-through, the ability to retain recent gains and whether market momentum strengthens as new crop information emerges.

Bullish scenario

Cocoa could extend its recovery if heavy rainfall continues to disrupt harvesting and deliveries, early crop assessments deteriorate, or new estimates confirm a materially smaller West African harvest. Falling ICE inventories would provide additional confirmation that physical availability is tightening.

Bearish scenario

Prices could come under renewed pressure if transport and harvesting conditions improve, crop estimates recover or inventories continue to rise. Evidence of weak processing demand and further strength in the US dollar could also limit buying interest.

Neutral scenario

Cocoa may consolidate as the market balances harvest concerns against the availability of existing stocks. In this scenario, prices could remain volatile around changing weather forecasts and crop estimates without developing a decisive trend.

Cocoa Price Forecast: Outlook for the Coming Sessions

The near-term outlook is neutral to cautiously bullish, with the main support coming from harvest disruption in the Ivory Coast and the possibility of lower production across West Africa in 2026/27.

The immediate focus will be on whether heavy rainfall continues to restrict access to cocoa farms and delay deliveries. Further evidence of poor pod development, disease or reduced crop potential could encourage additional buying, especially if Ghana’s production outlook deteriorates at the same time.

However, rising ICE inventories remain a significant obstacle to a stronger rally. The market will need to see evidence that weather-related disruption is translating into tighter physical availability, rather than merely delaying the movement of an otherwise substantial crop.

Demand will also be important. Continued weakness in European grindings could limit the market’s upside, while stronger processing activity in North America and Asia would help offset concerns about consumption.

Over the coming sessions, cocoa is likely to remain sensitive to weather updates, inventory changes and revisions to West African crop forecasts. A sustained bullish trend would require confirmation of lower production or tightening stocks. Without that confirmation, prices could remain volatile and vulnerable to renewed selling.

Analysis — Louis Roche, Today Markets

Cocoa is entering a period in which the outlook for the next West African crop is becoming increasingly important, but the market is not yet free of the supply overhang created by strong previous production and rising exchange inventories.

Heavy rainfall, potential black pod disease and concerns over pod development provide a credible basis for renewed price strength. The risk of El Niño adds to the uncertainty, particularly if it brings unfavourable growing conditions during critical stages of the crop cycle.

Yet a smaller projected harvest does not automatically guarantee a global deficit. Inventories, demand and the final size of the current crop will determine how much pressure the market ultimately faces.

The key signal for the coming sessions will be whether deteriorating crop expectations are accompanied by falling inventories and firmer physical demand. Until then, cocoa’s outlook remains cautiously constructive, but further gains may be uneven rather than sustained.

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Disclaimer: This material is for informational and educational purposes only and does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument or commodity. Cocoa futures can be volatile and involve substantial risk. Forecasts, crop estimates and inventory figures are subject to revision, and actual market outcomes may differ materially from expectations.