Cocoa Continues Its Powerful Rally as Demand Recovers and El Niño Risks Grow (9 July 2026)

Cocoa futures extended their powerful rally on Thursday, with both New York and London contracts reaching fresh multi-month highs. New York cocoa surged more than 5%, with every deferred contract gaining over 300 points, while London futures also posted another session of broad-based strength. Despite another day of significant gains, market participants continued to debate whether the rally is being driven by deteriorating market fundamentals or increasingly speculative positioning linked to weather risks.

In the New York market, every deferred contract recorded gains exceeding 300 points, highlighting one of the strongest daily advances of the recent rally. September 2026 closed at 6,366 (+327 points, +5.41%), December 2026 settled at 6,487 (+330 points, +5.36%), March 2027 finished at 6,566 (+329 points, +5.27%), while May 2027 closed at 6,540 (+316 points, +5.08%). The broad and nearly identical gains across the forward curve suggest continued institutional buying rather than isolated strength in nearby contracts.

Market Searches for Fundamental Justification

The speed of the recent rally has prompted traders to reassess the balance between supply risks and speculative momentum. Cocoa has added more than £800 per tonne in London over the course of the week, leading many market participants to question whether current prices fully reflect underlying fundamentals.

Weather remains one of the market's primary concerns. Forecasts from the U.S. National Weather Service continue to indicate an increasing probability of a strong El Niño developing during the coming months. Historically, El Niño has been associated with unfavourable weather conditions across West Africa, particularly during periods of already constrained global supplies. While this risk continues to support prices, some analysts argue that weather concerns alone do not fully justify the magnitude of the recent advance, pointing instead to momentum-driven buying and speculative positioning as additional drivers.

Barry Callebaut Expects Recovery Rather Than Another Supply Crisis

Against this backdrop, Swiss chocolate manufacturer Barry Callebaut offered a more measured assessment of the cocoa market, suggesting that current conditions differ significantly from those that triggered the severe cocoa crisis of 2023 and 2024.

Chief Financial Officer Peter Vanneste stated that the company does not expect a repeat of the supply shock experienced during the previous two seasons, even if a strong El Niño event develops later this year. According to the company, the market is entering the new crop season from a considerably stronger position, supported by improved global supply availability and higher cocoa inventories compared with previous years.

Vanneste noted that the extreme deficit during the 2023/24 season coincided with the main crop and represented the third consecutive year of global shortages. In contrast, today's market benefits from greater supply availability, providing a larger cushion against potential weather-related disruptions.

Barry Callebaut also highlighted several strategic improvements that have strengthened its resilience, including greater diversification of cocoa origins, increased sourcing flexibility and enhanced cocoa bean blending capabilities. These operational changes are intended to reduce the company's exposure to regional production disruptions and improve supply chain stability.

Demand Shows Early Signs of Improvement

While supply concerns continue to dominate market sentiment, Barry Callebaut reported encouraging evidence that global chocolate demand is beginning to recover after an extended period of weakness.

The company announced that third-quarter sales volumes increased 5.7% year-on-year, marking the first annual increase in two years. As a result, Barry Callebaut upgraded its full-year outlook, now expecting annual sales volumes to decline by only 1%, compared with its previous guidance of a 2.5% decline.

Management attributed the improvement primarily to stabilising market conditions in North America and described the recovery as an early indication that market fundamentals are beginning to improve. However, Chief Financial Officer Peter Vanneste cautioned that the recovery in cocoa demand is expected to take time, despite expectations that second-quarter 2026 cocoa grindings will increase.

The company also noted that many chocolate manufacturers have increasingly insourced production over recent years as a response to elevated cocoa prices and cost pressures. Nevertheless, Barry Callebaut expressed confidence that, after 2027, customer demand will gradually return to a more normal growth pattern as market conditions stabilize.

Additional evidence of improving consumption has emerged from cocoa processing data. Recent figures showed Ivory Coast cocoa grindings increasing 39.7% year-on-year, while the Netherlands, the world's largest cocoa processing hub, also reported stronger grinding activity. Since cocoa grindings are widely regarded as one of the best indicators of chocolate demand, these data suggest that consumption is gradually recovering despite elevated cocoa prices.

Analysts Remain Cautious

Despite the improving demand outlook, several analysts remain cautious regarding Barry Callebaut's assumptions.

The company continues to use an internal cocoa price assumption of approximately £3,000 per tonne (US$4,263), substantially below current market prices, which are trading between approximately £4,400 and £4,800 per tonne. Analysts noted that this significant difference could place pressure on future earnings should cocoa prices remain elevated for an extended period.

Market observers also warned that although demand appears to be improving, sustained high cocoa prices continue to increase production costs for chocolate manufacturers and could eventually weigh on consumer purchasing behaviour. While the initial recovery in demand is encouraging, higher raw material costs remain a significant challenge for the confectionery industry.

Futures Market Performance

The latest futures settlement reinforces the strength of the current rally. In New York, all major deferred contracts advanced by more than 5%, reflecting broad-based buying across the entire forward curve rather than isolated strength in nearby deliveries. London cocoa futures also extended their gains, rising by approximately 4.6–4.7% across the principal contract months.

The uniformity of these gains suggests that market participants continue to reprice cocoa higher across multiple delivery periods, reflecting confidence that current supply uncertainties may persist beyond the nearby contracts.

7-Day Weather Outlook (West African Cocoa Belt)

Weather conditions are expected to remain wet across much of the West African cocoa belt during the next seven days. Following last week's widespread rainfall and localized flooding, additional heavy precipitation is becoming a mixed factor for the market. While adequate soil moisture continues to support crop development, persistently saturated conditions may disrupt harvesting activities, slow bean drying, increase fungal disease pressure and hinder transportation from farms to export channels.

The heaviest rainfall is forecast across Liberia, southern Côte d'Ivoire, Ghana, southeastern Nigeria and western Cameroon, where repeated thunderstorms are expected throughout the week. Although these conditions remain favourable for maintaining soil moisture, they also increase the risk of logistical disruptions and crop quality issues if rainfall persists.

Consequently, the latest weather outlook is likely to be viewed as modestly supportive for cocoa prices. At this stage, excessive rainfall poses greater risks to harvesting efficiency, bean drying, transportation and disease pressure than additional benefits for crop development.

Futures Performance

The bullish momentum intensified for a fourth consecutive trading session. Rather than showing signs of exhaustion following the strong advances earlier in the week, cocoa futures accelerated once again, delivering another broad-based rally across both the New York and London markets. The consistency of the gains across nearly every actively traded maturity indicates that buying interest remained exceptionally strong and that market participants continued to reprice cocoa higher throughout the forward curve.

New York Cocoa (CC)

In the New York market, every deferred contract recorded gains exceeding 300 points, highlighting one of the strongest daily advances of the recent rally. September 2026 climbed from 6,039 to 6,366, an increase of 327 points (+5.41%). December 2026 advanced 330 points (+5.36%), rising from 6,157 to 6,487, while March 2027 increased 329 points (+5.27%) to finish at 6,566. May 2027 also posted an impressive gain of 316 points (+5.08%), closing at 6,540.

The nearly identical advances across all deferred maturities suggest that buying activity was widespread rather than concentrated in nearby contracts. Instead of a front-month squeeze, the market experienced a broad upward repricing of cocoa's medium-term outlook. The larger gains compared with the previous trading session further indicate that bullish conviction strengthened as the rally progressed, with participants continuing to add long exposure across the forward curve.

London Cocoa (C)

London cocoa futures also extended their rally, although the magnitude of the gains was slightly smaller than those recorded in New York. September 2026 increased from 4,519 to 4,732, gaining 213 points (+4.71%). December 2026 rose 210 points (+4.59%) to 4,790, while March 2027 advanced 214 points (+4.61%) to 4,853. May 2027 delivered the strongest percentage increase among the deferred contracts, climbing 218 points (+4.71%) to close at 4,847.

The remarkable uniformity of these increases demonstrates that buying pressure was distributed evenly across the London forward curve. Every actively traded contract appreciated by approximately the same amount, reinforcing the view that investors were repricing the entire cocoa market rather than responding to temporary supply tightness in nearby deliveries. Although London's percentage gains were slightly below those observed in New York, the market nevertheless exhibited exceptionally strong and broad-based bullish participation.

EFP, EFS and Spread Activity

Trading activity on 09 July continued to emphasize strong participation in calendar spread strategies, while Exchange for Physical (EFP) and Exchange for Swaps (EFS) transactions remained relatively limited.

New York Cocoa (CC)

In the New York (CC) market, 154 EFP contracts and 331 EFS contracts were executed across all maturities. The majority of EFP activity was concentrated in the September 2026 (84 contracts) and December 2026 (70 contracts) deliveries, while EFS trading occurred primarily in December 2026 (296 contracts) and March 2027 (35 contracts). No block trades were reported during the session. Calendar spread trading remained exceptionally active, with 32,154 spread contracts traded. The largest spread volumes were recorded in December 2026 (11,549 contracts), followed by September 2026 (8,189 contracts) and March 2027 (6,367 contracts), indicating that traders were actively managing positions across the forward curve while maintaining strong liquidity.

London Cocoa (C)

In the London (C) market, EFP activity was even more limited, with 421 contracts executed almost entirely in the December 2026 (371 contracts) and March 2027 (50 contracts) contracts. EFS activity totaled just 30 contracts, all of which occurred in the July 2026 contract. As in New York, no block trades were reported. Calendar spread trading remained robust at 28,158 contracts, led by December 2026 (8,885 contracts), September 2026 (6,161 contracts) and March 2027 (5,436 contracts). The concentration of spread activity in the most actively traded deferred contracts reflects continued portfolio repositioning and hedging rather than speculative trading focused solely on the nearby delivery month.

US–UK July Spread

(Sep Contract)

$6,366 − (£4,732 x 1.341$/£) =$20ton (up from $-12ton)

Volume and Open Interest

New York Cocoa (CC)

Trading activity in the New York cocoa market remained exceptionally strong throughout the recent rally. Daily volume increased slightly from 54,825 contracts on 08 July to 55,509 contracts on 09 July, following 59,983 contracts on 07 July and 63,024 contracts on 06 July. Despite cocoa prices recording three consecutive sessions of significant gains, trading activity remained consistently elevated, indicating sustained market participation and continued buying interest.

Open interest also provides important confirmation that the rally has not been driven by short covering. Between 03 July and 08 July, open interest increased steadily from 191,332 to 197,946 contracts, reaching the highest level of the reporting period. A rally driven primarily by short covering would normally be accompanied by declining open interest as traders buy back and close existing short positions. Instead, the continued increase in open interest suggests that new positions are being established, with fresh buying entering the market and supporting the advance. Although the 09 July open interest has not yet been published, the existing trend points toward continued participation from institutional and speculative investors rather than merely the liquidation of bearish positions.

London Cocoa (C)

The London cocoa market displayed a similarly constructive pattern. Daily trading volume remained remarkably stable, increasing modestly from 43,919 contracts on 08 July to 44,252 contracts on 09 July after recording 43,364 contracts on 07 July and 45,574 contracts on 06 July. The consistency of trading activity during a period of rapidly rising prices reflects healthy market liquidity and broad participation across the forward curve.

Open interest also continued to build ahead of the latest rally. Between 03 July and 08 July, total open interest increased from 231,798 to 235,463 contracts, indicating that market participants continued to establish new positions rather than close existing ones. Similar to New York, this behavior does not support the view that the rally has been driven primarily by short covering. Instead, the combination of rising prices and increasing open interest suggests that fresh capital has continued to enter the market, reinforcing the strength of the prevailing bullish trend. Once the 09 July open interest figures are released, they will provide further confirmation of whether this pattern continued through the latest trading session.

Exchange Trading Volume

These figures refer only to ICE Deliverable Stocks (Exchange-Visible)

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