Cocoa Futures Soar Amid West Africa Crop Worries

Cocoa futures have surged to their highest since December due to concerns about weaker West African crop forecasts for the coming season. Dry weather conditions have led to a bleak outlook for the next harvest, and professional investors are becoming more confident that prices will rise further. Cocoa stockpiles held in US ports have fallen, potentially signaling rising demand or tightening supply. Additionally, US tariffs on imports from Ivory Coast, Ghana, Brazil, and Ecuador will increase the cost of cocoa for US processors.

Cocoa futures have surged to their highest levels since December, driven by concerns about weaker West African crop forecasts for the upcoming season. Dry weather conditions in the cocoa-growing regions of Ivory Coast and Ghana have raised alarms about the next harvest, leading professional investors to become more confident that prices will continue to rise.

On Monday, cocoa futures in New York climbed by as much as 11% before paring gains. The US exchange cocoa stockpiles have been falling, reaching their lowest level in almost two months. This decline in stockpiles, coinciding with hedge funds rolling contracts over to the next December contract, has pushed futures prices higher [1].

The supply crisis has not abated, according to Sholom Sanik of Friedberg Mercantile Group Ltd., who noted that "it certainly means that funds are still bullish." Market players are cautious about the upcoming 2025-26 season, with government permits for exports from the Ivory Coast and Ghana reported to be slower, contributing to an increased risk perception regarding the crop [1].

Meanwhile, arabica coffee futures also rose, with exchange stockpiles at their lowest in nearly 15 months. Tariffs on Brazil, the world's top coffee grower, could lead to a "violent upside reaction," according to ADM Investor Services [1].

Additionally, US tariffs on imports from Ivory Coast, Ghana, Brazil, and Ecuador will increase the cost of cocoa for US processors, further tightening the supply chain. Cocoa prices on Monday rallied to 6-week highs, with September ICE NY cocoa futures closing up by 252 points (+2.96%) and September ICE London cocoa #7 closing up by 293 points (+5.34%) [2].

Concerns about dry weather in West Africa have pushed prices sharply higher. Weather reports indicate little to no precipitation over the past few weeks in the cocoa-growing areas of Ivory Coast and Ghana, which could negatively impact the development of flowers and cherelles on cocoa plants. According to the European Centre for Medium-Range Weather Forecasts, rainfall in the Ivory Coast and Ghana this season remains below the 30-year average, combined with high temperatures, risks hurting cocoa pod development for the main crop harvest that starts in October [2].

The poor quality of the Ivory Coast's mid-crop, which is currently being harvested through September, is also supportive of prices. Cocoa processors are complaining about the quality of the crop and have rejected truckloads of Ivory Coast cocoa beans. The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT [2].

The weakness in chocolate demand is a negative factor for cocoa prices. Chocolate maker Lindt & Spruengli AG in July lowered its margin guidance for the year due to a larger-than-expected decline in first-half chocolate sales. Barry Callebaut AG also reduced its sales volume guidance for a second time in three months, citing persistently high cocoa prices [2].

However, higher cocoa production by Ghana is bearish for cocoa prices. The Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would increase by +8.3% y/y to 650,000 MT from 600,000 MT in 2024/25. Ghana is the world's second-largest cocoa producer [2].

In conclusion, cocoa futures have surged due to concerns about weaker West African crop forecasts, dry weather conditions, and US tariffs on imports. While the supply crisis persists, the potential for higher cocoa prices is supported by the current market dynamics.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-11/cocoa-futures-surge-on-worries-about-weaker-crops-in-west-africa
[2] https://www.nasdaq.com/articles/cocoa-prices-rally-dry-west-african-weather