Cocoa futures posted one of their sharpest single-day gains of the century on Tuesday, with July ICE New York cocoa surging 9.83% to $4,169 per tonne and July ICE London cocoa rising 10.24%, as a confluence of weather shocks, supply concerns, and geopolitical disruption triggered aggressive fund short-covering across the market.
The immediate catalyst was heavy rainfall in the Ivory Coast that caused flooding and cut off farmers’ access to cocoa plantations, raising fears of near-term supply disruption in the world’s largest cocoa-producing nation. The move extended a broader pattern of volatility that has made cocoa one of the most watched commodity markets of 2026.
El Niño adds a longer-term threat
Beyond the flooding, markets are increasingly pricing in the risk of a structural supply shock from an emerging El Niño weather pattern. The US National Oceanic and Atmospheric Administration estimates an 82% probability that El Niño conditions will develop between May and July and persist through the end of the year, with a 67% chance of a Super El Niño. Such conditions typically bring warmer, drier weather to West Africa, where the Ivory Coast and Ghana together produce more than half of the world’s cocoa supply.
Early surveys of the 2026/27 West African cocoa crop are already showing below-average cherelle formation on cocoa trees, signalling a weak outlook for the main harvest that begins in October. On April 29, commodity research firm StoneX cut its 2026/27 global cocoa surplus estimate to 149,000 metric tonnes from a January forecast of 267,000 metric tonnes, citing El Niño risks. It also trimmed its 2025/26 surplus estimate to 247,000 metric tonnes from 287,000 metric tonnes.
The Hormuz factor
The prolonged closure of the Strait of Hormuz, effectively shut since the Iran war began on February 28, is adding a supply chain dimension to cocoa’s price drivers that extends well beyond West African weather. The closure has reduced fertiliser supplies reaching cocoa-growing regions, pushed global shipping rates and insurance costs sharply higher, and elevated fuel prices for importers, raising the landed cost of cocoa across consuming nations. This is a factor that did not exist in previous cocoa bull cycles and adds a layer of price support that could prove persistent regardless of crop outcomes.
The bearish counterweights
Tuesday’s move came against a backdrop of genuinely mixed fundamentals. The Ivory Coast boosted its cocoa delivery estimate for 2025/26 to 2.2 million metric tonnes on May 14, up from a prior projection of 1.8 to 1.9 million metric tonnes, citing favourable weather earlier in the season. Cumulative farmer shipments to ports in the current marketing year through May 24 stood at 1.64 million metric tonnes, up 2.5% year-on-year. ICE cocoa inventories rose to a 1.75-year high of 2,745,277 bags on Tuesday.
Demand signals are also soft in key consuming regions. North American Q1 cocoa grindings fell 3.8% year-on-year to 106,087 metric tonnes, while European Q1 grindings dropped 7.8% to 325,895 metric tonnes, the lowest first-quarter reading in 17 years. The exception was Asia, where Q1 grindings rose 5.2% to 223,503 metric tonnes, significantly outperforming expectations of a 6.7% decline.
Nigeria, the world’s fifth-largest cocoa producer, adds another supply-side concern. Bloomberg reported that Nigerian cocoa exports in March fell 35% year-on-year to 18,052 metric tonnes, and the country’s Cocoa Association projects a further 11% production decline in 2025/26 to 305,000 metric tonnes.
What the market is weighing
Tuesday’s rally reflects the market’s judgment that the bearish case, adequate near-term Ivory Coast supplies and weak grinding demand, is increasingly being overwhelmed by the forward-looking risk profile. A Super El Niño hitting West Africa in the second half of 2026, combined with structurally elevated shipping and input costs from the Hormuz closure, could compress the existing surplus far faster than current consensus estimates suggest. For now, short-covering has done the heavy lifting. Whether fresh longs follow will depend on whether the El Niño signal strengthens and whether the Hormuz situation remains unresolved through the critical growing season.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making any investment decisions.