Cocoa: Weather Risk Meets Surplus Reality

Key Takeaways

• ICE cocoa futures rose to $3,923/tonne on speculation, not fundamentals
• Warehouse stocks hit 2.75 million bags, highest in two years
• StoneX forecasts 247k‑tonne 2025/26 surplus, 149k‑tonne 2026/27
• European grindings fell 7.8% YoY, North America down 3.8%
• Managed money net short at 19,885 contracts, largest in three years

Pulse Analysis

The cocoa market is currently wrestling with a paradox of surplus and demand erosion. ICE‑certified warehouse stocks have swelled to over 2.7 million bags, a level not seen since 2024, while StoneX’s latest forecasts predict a 247,000‑tonne excess for the 2025/26 season and a still‑significant 149,000‑tonne gap in 2026/27. Such inventory depth erodes the forward curve premium that typically supports futures prices, making speculative moves the primary driver of recent price action.

On the consumption side, the story is equally bleak. European grindings dropped 7.8% year‑over‑year in Q1 2026, marking the weakest first‑quarter performance in 17 years, and North American grindings slipped another 3.8%. Retail data reinforce the trend, with U.S. chocolate sales declining 1.3% over the March‑to‑May period. A stronger dollar further squeezes non‑dollar buyers, limiting the appeal of dollar‑denominated contracts and reinforcing the bearish bias.

The market’s structural fragility is amplified by a massive short position—nearly 20,000 contracts, the highest since 2020—paired with a high probability of El Niño development. NOAA assigns an 82% chance of El Niño between May and July, and a 67% likelihood of a super‑event, which could depress cherelle formation in West Africa and tighten supplies. Technical analysis shows the 50‑day SMA at $3,655 acting as a critical support, while $4,062 remains the immediate resistance. A breach of either level could trigger rapid price swings, underscoring the need for market participants to monitor weather forecasts and inventory data closely.