Cocoa prices have surged 100% since March! Jefferies: After heavy rains, El Niño may follow, worsening the West African production crisis

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Just as the cocoa market was beginning to see signs of supply and demand recovery, the supply side has again flashed a warning.

Since early March, New York cocoa futures prices have doubled, once again approaching the $6,000-per-ton mark. The latest research report from Jefferies warns that the world’s two major cocoa-producing countries, Côte d’Ivoire and Ghana, are experiencing unusual weather disturbances, and crop growth for the new season is noticeably weaker than normal. If the weather continues to deteriorate, the global cocoa market may once again revert from a brief surplus back to supply tightness.

Market concerns are not unfounded. The latest data from the International Cocoa Organization (ICCO) shows that the global cocoa market is expected to record a surplus of about 48,000 tons for 2024/25, but this is significantly less than the previously estimated 75,000 tons; meanwhile, although the global inventory-to-consumption ratio has recovered somewhat from the previous year, it remains below the historical average, meaning that the market’s buffer capacity to withstand supply shocks is still very limited.

West Africa Experiencing a "Perfect Storm"

Jefferies analyst Scott Marks points out that West Africa is currently undergoing an extremely unusual combination of weather. Since March this year, average temperatures in Côte d’Ivoire and Ghana have remained about 2°F below the five-year average, while rainfall surged significantly entering June: rainfall in Côte d’Ivoire is about 46% higher than the historical average, and Ghana is about 52% higher.

Persistent cool and damp weather may relieve high-temperature stress, but it creates ideal conditions for fungal diseases such as Black Pod Disease and Brown Rot. These two diseases are among the main factors affecting cocoa yield, potentially leading to large-scale premature pod rotting and dropping.

More concerning for the market, signs of reduced output for the new season have already appeared. Citing preliminary industry surveys, Jefferies reports that the flower and fruit formation rates and pod development of Côte d’Ivoire’s 2026/27 cocoa crop are both below normal, and the industry has downgraded the new season’s production forecast to between 1.7 and 1.8 million tons, down about 18% from the 2.2 million tons of 2025/26.

Global Supply-Demand Recovery Remains Fragile

After two consecutive years of severe supply shortages, the global cocoa market had been gradually regaining balance.

The ICCO’s latest report, released in May this year, predicts a global cocoa surplus of about 48,000 tons in 2024/25. However, this figure is already noticeably smaller than the previously estimated surplus of 75,000 tons, indicating that the supply recovery has not been as strong as expected.

Meanwhile, although the global cocoa inventory-to-grinding ratio has improved somewhat compared to 2023/24, it is still significantly lower than the historical average. This means that downstream inventories remain low, making prices prone to sharp fluctuations if further production cuts occur in key producing countries.

El Niño May Be the Next Major Risk

In addition to the current heavy rainfall, the market has begun to pay attention to another potential threat.

Jefferies notes that the possibility of El Niño forming later this year is being closely watched by traders. If El Niño develops, it could bring hot, dry weather to West Africa, rapidly shifting from the current wet environment, and further affecting flowering, fruit set, and maturation of cocoa pods.

This means that even if disease risks from excessive rainfall ease, subsequent drought could still reduce new season yields, once again tightening global cocoa supplies and supporting sustained high cocoa prices.

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