In the short term, the cocoa market is driven by technical factors, the international macroeconomic landscape—influenced by geopolitical developments between the U.S. and Iran and the Federal Reserve’s decision to keep interest rates unchanged—and changes in supply and demand fundamentals. In the short and medium term, price dynamics remain structurally sensitive to weather conditions. The occurrence of a new El Niño event introduces additional meteorological variables into the global balance, altering the pricing of climate risk and the slope of futures curves for the coming seasons.
Here are some key themes from this analysis:
Climate models indicate that El Niño is likely to remain active in the coming months, with a probability of reaching strong intensity in the second half of the year.
The impact of El Niño on rainfall in cocoa-growing regions does not follow a clear pattern. While it can cause dry conditions in Central America, northern Brazil, and parts of Africa, it tends to increase rainfall in Ecuador and Peru. In West Africa, the response depends on how the phenomenon interacts with the West African monsoon and the Harmattan winds, which can alter the rainfall pattern and intensify the dry season.
Rainfall during this period will influence the development of the fruits harvested at the end of the 2026/27 main harvest and the flowering that will give rise to the 2026/27 off-season harvest.
While rainfall patterns vary across regions, temperature records show a more similar pattern. Hedgepoint’s analyses of cycles influenced by the phenomenon (18/19, 19/20, and 23/24) indicate that Ivory Coast, Ghana, and Ecuador recorded above-average temperatures during the flowering period. The rise in temperature can increase stress on crops and affect flower and fruit development.
Carolina França, a market intelligence analyst at Hedgepoint Global Markets, notes that the cocoa crop’s response to El Niño may be nonlinear and delayed because cocoa is a perennial crop. Although El Niño is associated with crop yield reductions due to rising temperatures and irregular rainfall, the impacts depend on the intensity of the event, its timing within the crop cycle, and the sensitivity of flowering and fruit development. Additionally, historical records indicate that production losses may be concentrated in the crop directly affected by the event, with the possibility of recovery in subsequent cycles through the plant’s physiological reallocation of resources and changes in the rainy season.
For the 2026/27 crop year, Hedgepoint’s proprietary estimates indicate a reduction in supply from the main origins:
With these revisions, the projected global surplus for the 2026/27 crop year is adjusted to 111,000 metric tons, reflecting a 2.0% decline in global production (totaling 4.796 million metric tons) and a 2.5% increase in global demand (crushing), estimated at 4.685 million metric tons.
With the inclusion of climate variables in the long-term cocoa balance, crop monitoring and risk management remain essential for structuring commercial operations.
Track the impact of climate factors and global supply-and-demand dynamics through our fundamental analyses on the Hedgepoint Hub