Pricier chocolate? El Niño revives risks for global cocoa market after price relief

El Niño is putting cocoa back among the agricultural commodities most exposed to weather shocks, just as the market is still recovering from the supply crisis that drove prices to record highs in 2024.

After a correction that brought prices down from above US$10,000 per tonne to around US$3,000 this year, uncertainty has returned to the market. On Monday (22), cocoa rose 8.28% to US$4,588 per tonne, bringing gains for the month to 20%, although prices are still down nearly 25% for the year.

The U.S. National Oceanic and Atmospheric Administration, or NOAA, said last week that El Niño had begun after a sharp rise in sea surface temperatures in the equatorial Pacific in recent months. Climate models point to a higher likelihood that the phenomenon will intensify in the second half of 2026 and early 2027.

For cocoa traders, the concern goes beyond weather. Global inventories remain low and are still below the historical levels that usually cushion the market against production losses. After several years of deficits and the supply crisis of 2023 and 2024, any weather deterioration in key producing regions could feed through to prices more quickly.

Arkady Gevorkyan, an analyst at Citi, said cocoa has become one of the agricultural commodities most sensitive to El Niño because production is heavily concentrated in regions exposed to the phenomenon. That concentration explains the growing focus on Ivory Coast, Ghana and Ecuador, which play a central role in global supply.

Until recently, the dominant story in cocoa had been a partial recovery in supply and softer demand. Ignacio Canals Polo, an analyst at Bloomberg Intelligence, said prices had fallen by about half over the past 12 months as consumers absorbed the impact of more expensive chocolate and West African producers showed signs of improvement.

The industry also responded to the price shock by adjusting product formulas, shrinking package sizes and passing higher costs on to consumers, moves that weighed on consumption in developed markets.

First-quarter grindings totaled 325,895 tonnes in Europe, 106,087 tonnes in North America and 223,503 tonnes in Asia. Combined, the volume was about 3.1% below the level recorded a year earlier, reflecting greater price sensitivity among Western consumers, while Asian demand continued to grow.

William Collins, an analyst at Yaru Investments, said the market has moved past the extreme shortage seen in 2023 and 2024, but is not yet fully balanced. He described the current phase as one of “convex normalization”: supply and demand are less misaligned than they were two years ago, but the system remains vulnerable to external shocks.

Official forecasts point to an improved global balance. The International Cocoa Organization (ICCO) estimates global production at close to 4.7 million tonnes in the 2025/26 crop year and projects a surplus of about 75,000 tonnes. Analysts, however, say that outlook could change if weather conditions worsen during the next crop.

Canals Polo said the shift toward El Niño represents a significant and still underestimated risk of renewed pressure on cocoa prices. The phenomenon tends to alter rainfall and temperature patterns in major producing regions and could bring hotter, drier conditions to West Africa, reducing soil moisture and hurting yields.

Citi expects cocoa to reach US$5,000 per tonne in three months and US$6,000 in 12 months. Gevorkyan said the market could react strongly if weather damages production prospects in West Africa and South America.

Traders are already shifting their attention from the current crop to the 2026/27 cycle, when the effects of the new weather pattern could become clearer during flowering and pod development.

Low stocks increase the risk of new shocks

The main difference from previous weather episodes is the level of available stocks. Wells Fargo estimates that the stocks-to-grindings ratio fell to a historic low of 26.5% in 2024. Although the indicator recovered to 28.8% in 2025, it remains far below the historical average of 46%.

With smaller reserves, any production disruption is likely to be reflected in prices more quickly. That vulnerability is reinforced by the geographic concentration of supply. Ivory Coast accounts for about 38.2% of global cocoa production, while Ghana represents another 12.4%. Together, the two countries supply more than half of the cocoa consumed worldwide.

Barclays noted that the 2023-24 weather episode significantly disrupted rainfall patterns in West Africa. Excessive rains were followed by dry spells, favoring crop diseases and leading to a steep drop in production. The result was a historic surge in prices.

That recent experience has become a reference point for analysts because it showed how quickly the market balance can shift. After the crisis, the correction was also sharp, supported by a partial recovery in supply and weaker demand. Now, a new El Niño is raising questions about whether that normalization can last.

Citi cut its production estimate for Ivory Coast by 120,000 tonnes, for Ghana by 30,000 tonnes and for Ecuador by 25,000 tonnes. As a result, the bank expects the market to move toward a deficit of 56,000 tonnes.

Gevorkyan warned that pod development has been “extremely weak” for the main crop, which could have a meaningful impact on West African supply in the coming quarters.

Risk of a strong El Niño worries traders

For the market, the key question is no longer whether El Niño will occur, but how intense it will be. The latest climate updates have raised the probability of a stronger event.

Citi said the probability of an intense or record El Niño has risen to 63%, from 37% in previous estimates. Wells Fargo sees an approximately 80% chance of the phenomenon occurring this year, while climate models still leave open the possibility of a major event.

Past episodes explain why traders are concerned. Wells Fargo noted that the two largest declines in global cocoa production over the past decade coincided with El Niño events. Global output fell 6% in the 2015/16 cycle and 12.9% in 2024.

The effects were not limited to West Africa. In Brazil, production fell 38.7% in 2015/16, while Ecuador posted an 11.1% decline. In 2024, Ivory Coast output fell 25.3% and Ghana’s production dropped 31.3%.

Canals said risks tied to adverse weather patterns are reappearing in a market that still faces structural constraints, including low farm investment, aging trees and heavy geographic concentration of production.

Analysts are also monitoring early indicators for the next crop. Bloomberg Intelligence highlighted weakness in the count of cherelles, the small developing pods whose progress often provides an early signal of main-crop quality. A low number of cherelles may point to weaker output next season.

The market’s vulnerability extends beyond weather. Collins said 73% of farmers surveyed in Ivory Coast had not purchased fertilizers for the next production cycles, while only 2% had bought all the inputs they needed. High fertilizer prices and financial pressure on growers could worsen the impact of any weather deterioration.

Even so, analysts are not yet forecasting an automatic repeat of the 2024 crisis. Wells Fargo said the most likely scenario remains a surplus market, although with historically low inventories for several years.

Rainfall in West Africa, the final intensity of El Niño and demand’s response to recent price increases will determine whether cocoa continues to normalize or returns to being one of the most volatile agricultural commodities in global markets.

Source: adapted from Bloomberg Línea

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