On Friday, cocoa futures in both New York and London climbed higher, managing to pare back some of the losses accumulated over the course of the week. Market participants are currently weighing the prospect of ample near-term supply against the potential for a deficit in the upcoming season.
New York cocoa futures rose as much as 2.2% during Friday's session, reducing the weekly decline to approximately 5%. The intense price volatility reflects a market being pulled in different directions by conflicting supply signals—traders are observing sufficient near-term availability while simultaneously growing increasingly concerned about the mounting risks to next season's crop output in major producing nations such as Côte d'Ivoire and Ghana.
The chief executive of Guan Chong Berhad, Asia's largest cocoa processor, recently projected that the global cocoa market will experience a supply shortage during the 2026-27 growing season, which would mark the first instance of insufficient supply in three years. During the CAA International Cocoa Conference held in Singapore this week, a media survey of nine attending traders and brokers revealed that six of them also anticipate a supply shortfall.
Weather conditions are adding another layer of uncertainty to the supply outlook. The intensification of the El Niño phenomenon is threatening crop development across key growing regions. According to Ghana's state-owned exporter, the country's cocoa output could decline by as much as 38% compared to the same period last year. El Niño is an anomalous climatic occurrence in the tropical Pacific that typically happens every few years, though not on a regular schedule. The World Meteorological Organization issued a bulletin on September 3 confirming that an El Niño event has materialized and is expected to strengthen into a super El Niño within the coming months. Barclays has cautioned that this extreme weather could drive up prices across a range of commodities.
The demand side, however, is presenting a mixed picture. In Europe, the world's largest cocoa-consuming region, demand remains subdued. In contrast, cocoa processing activity in Asia has shown signs of a recovery, with second-quarter processing volumes surging by 25%. Nevertheless, a rebound in chocolate and confectionery consumption does not necessarily translate into a similar resurgence in cocoa usage. Mondelez International's Chief Cocoa Officer, Darren O'Brien, said in an interview during the Singapore conference that following the significant price surge a few years ago, chocolate companies broadly reduced product sizes and increased the use of substitute ingredients. This implies that even if businesses sell the same quantity or more of their products, their actual demand for cocoa raw materials could actually decline instead.
"The product formats have changed. If chocolate bars become smaller, the amount of cocoa used naturally decreases," O'Brien stated. "Even if demand recovers, even if you sell the same number or even more chocolate bars, the total amount of cocoa required could be different from before." As of the time of writing, New York cocoa futures were trading up 1.8% at $6,285 per metric ton. London cocoa futures were up 1.4%. Arabica coffee futures gained 0.5%, while raw sugar futures rose 1.7%.