Cocoa price rebound narrows, weekly decline is strong, El Niño threatens harvests in major producing countries

The Zhitong Finance App learned that on Friday, New York and London cocoa futures prices both rose, narrowing this week's decline. The market is weighing the prospect of sufficient supply in the short term but a possible shortage next season.

New York cocoa futures rose 2.2% on Friday, and the weekly decline narrowed to about 5%. Drastic price fluctuations reflect that the market is being swayed by conflicting supply signals — traders, on the one hand, see sufficient supply in the recent past, and worry that the risk of next season's crop cuts in major producing countries such as Côte d'Ivoire and Ghana is accumulating.

CEO Guan Chong Berhad, the largest cocoa processor in Asia, recently predicted that the global cocoa market will experience a supply shortage during the 2026-27 production season. This will be the first time in three years that there will be a shortage of supply. A media survey of nine participating traders and brokers during the CAA International Cocoa Conference held in Singapore this week showed that six of them also predicted supply shortages.

Weather factors are adding variables to supply prospects. The intensification of the El Niño phenomenon is threatening crop growth in major production areas. According to Ghanaian state-owned exporters, the country's cocoa production may have dropped by as much as 38% compared to the same period last year.

According to reports, El Niño is an abnormal climatic phenomenon in the tropical Pacific region. It usually occurs every few years, but it is irregular. The World Meteorological Organization issued a communiqué on September 3 stating that the El Niño incident has been confirmed and is expected to intensify into a super El Niño event within a few months. Barclays warned that this extreme weather could push up the prices of a range of commodities.

Demand-side performance, on the other hand, showed a fragmented trend. In Europe, the world's largest cocoa consumer, demand is still weak; however, cocoa processing activity in Asia has shown signs of recovery, and processing volume jumped 25% in the second quarter. Despite this, a recovery in demand for chocolate and snacks does not necessarily mean that there will be a similar rebound in cocoa consumption.

Darren O'Brien, chief cocoa officer at Mondelez International, pointed out in an interview during the Singapore conference that after the sharp rise in cocoa prices a few years ago, chocolate companies generally reduced product specifications and increased the use of alternative ingredients. This means that even if a company sells the same quantity or more of its products, its actual demand for cocoa ingredients may decline.

“Product specifications have changed. “If the size of chocolate bars gets smaller, the usable amount will naturally decrease,” O'Brien said. “Even if demand recovers, even if you sell the same or more chocolate bars, the total amount of cocoa needed may not be the same as before.”

As of press time, the price of New York cocoa futures rose 1.8% to $6,285 per tonne. London cocoa futures rose 1.4%. Arabica coffee futures rose 0.5%. Raw sugar futures prices rose 1.7%.