Market Overview
Cocoa futures have experienced a significant decline of 3.5%, dropping below $6,000 per tonne. This follows a remarkable rally of over 60% since early June, where prices in London reached their highest levels since September 2025. The initial surge was driven by concerns regarding supply from West Africa, but the current market sentiment is mixed.
Inventory Levels
Recent data indicates that cocoa inventories are rising across global markets, with ICE-monitored stocks surpassing 3.41 million bags, marking a two-year high. This increase in inventory is contributing to the ongoing sell-off in cocoa futures, as ample physical supply is available.
Supply Outlook
The projected global supply surplus for the 2026/27 season has narrowed to approximately 25,000 tonnes, according to Bloomberg estimates. Firms such as StoneX and Hedgepoint Global Markets have adjusted their surplus forecasts downward, indicating a tighter supply situation despite healthy inventories.
Production Estimates in West Africa
Preliminary estimates suggest that Ivory Coast's main crop will be between 1.55 million to 1.6 million tonnes, consistent with the previous year. However, forecasts indicate a potential 20% decline in production due to various challenges, including diseases affecting cocoa pods and high prices for crop protection products. Ghana's output is also expected to decrease by 13%.
In Cameroon, production is anticipated to remain stable, but farmers are facing increasing issues with diseases and pests. Nigeria's output is projected to fall by 2.4% due to adverse weather conditions, including drought and flooding.
Weather Impact
The current El Niño phenomenon may exacerbate weather conditions, shifting from excessive moisture to drier conditions that could threaten the final stages of the main harvest. This shift could further complicate the supply outlook for cocoa.
Technical Analysis
From a technical standpoint, cocoa futures have broken above their 200- and 50-session moving averages. Despite the recent pullback, prices remain above these averages and are trading in the middle of their price channel, indicating potential for future movements.