Cocoa Radar has highlighted how the cocoa market has delivered another powerful reminder that sentiment can shift far faster than underlying fundamentals. This week, London cocoa futures surged 12.2% while New York gained 13.1%, marking one of the strongest advances since the height of the 2024–25 cocoa crisis. Although arabica coffee recorded an even larger rally, cocoa’s move reflects a significant reassessment of future supply risks rather than immediate shortages.
Markets Are Pricing Probability, Not Certainty
The principal catalyst is growing concern over the potential return of El Niño and its implications for the 2026–27 West African crop. Traders are increasingly focused on pod development and survival rates ahead of the next main crop harvest, assigning a higher probability to weather-related production losses than only weeks ago.
The market is responding to uncertainty rather than confirmed supply disruption. Côte d’Ivoire’s decision to temporarily pause forward sales of the new crop until production prospects become clearer has reinforced the market’s cautious outlook, highlighting how quickly expectations can reshape pricing.
Latin America Has Yet to Deliver the Expected Supply Relief
Attention is also turning to production outside West Africa.
Expectations that Ecuador would deliver substantially stronger export growth have yet to materialise. Industry trade data indicate cumulative cocoa exports are running only around 2% higher year-on-year after the first eight months of the season—well below expectations following significant investment in production. While some market participants still anticipate full-season export growth of between 3% and 6%, the anticipated surge in additional supply has not yet emerged.
Should Latin American production continue to underperform expectations while West African weather risks intensify, the global supply outlook could tighten considerably.
Short Covering Has Accelerated the Rally
Speculative positioning has amplified price movements.
Managed money entered the rally holding sizeable net short positions. As cocoa futures broke through key technical resistance levels, those positions rapidly unwound, forcing funds to buy back contracts and accelerating gains.
Sources speaking to CocoaRadar indicate that speculative buying alone does not explain the pace of the rally. Rather, technical breakouts combined with aggressive short covering created the conditions for unusually large daily price movements. Despite recent buying, speculative positioning is still believed to retain a meaningful net short bias, suggesting volatility may remain elevated.
Commercial Buying Behaviour Is Changing
Perhaps the most significant structural shift is occurring away from the futures market.
According to market sources, chocolate manufacturers currently hold, on average, approximately ten months of cocoa cover. However, procurement teams with lighter forward positions are becoming increasingly uncomfortable as prices recover.
