Futures Surge as Demand Strengthens and El Niño Risks Increase (8 uly 2026)

• NY Sep'26 cocoa settled at 6,039, up 260 points (+4.50%), extending the rally for a third consecutive session after briefly trading above 6,100.
• Barry Callebaut Q3 sales volumes rose 5.7% YoY, marking the first quarterly volume growth in over two years, signaling improving global chocolate demand.
• WMO upgraded its El Niño outlook to potentially "very strong", increasing weather risks for the 2026/27 West African cocoa crop.

During Wednesday's session, New York cocoa futures extended their powerful rally, gaining 260 points (+4.50%) to settle at 6,039. Strong buying momentum pushed prices above the 6,100 level and briefly tested fresh multi-week highs before the market entered a period of consolidation. As the session progressed, traders took some profits and prices oscillated within a relatively narrow range, but selling pressure remained limited and buyers successfully defended the important 6,000 psychological level. The session concluded with prices holding firmly above all major moving averages, preserving the strong bullish technical structure.

One of the most important fundamental developments for the cocoa market came from Barry Callebaut, the world's largest industrial chocolate manufacturer and one of the best indicators of global chocolate demand. The company reported that third-quarter sales volumes increased by 5.7% year-on-year, marking the first quarterly volume growth in more than two years. Even more importantly, Barry Callebaut improved its full-year volume outlook, now expecting sales volumes to decline by only 1%, compared with the market consensus of a 2.5% decline. The improvement was driven by stabilizing operations and improving demand, particularly in North America, suggesting that chocolate consumption is proving considerably more resilient than expected despite historically high cocoa prices.

This development is particularly significant because one of the principal bearish arguments over the past year has been that record cocoa prices would trigger widespread demand destruction. Instead, the latest results indicate that manufacturers and consumers are adapting to higher prices, with demand beginning to stabilize and recover rather than deteriorate further. Although Barry Callebaut maintained its guidance for a mid-teens decline in recurring operating earnings, reflecting elevated cocoa costs, the improvement in sales volumes is a much stronger leading indicator for the physical cocoa market. Together with recent gains in futures prices, rising open interest, and sustained institutional buying, the report strengthens the view that the current rally is increasingly supported by improving fundamentals rather than purely speculative activity.

Market sentiment received further support from dealer commentary suggesting that the scope for renewed selling pressure may be becoming increasingly limited. According to one cocoa dealer, Côte d'Ivoire is already well sold, meaning that a large proportion of the country's exportable production has already been marketed or hedged. This reduces the likelihood of significant new producer hedging entering the futures market, removing an important source of selling pressure that has previously capped rallies. Consequently, continued buying interest may encounter less resistance if bullish momentum persists.

Additional support came from the World Meteorological Organization (WMO), which upgraded its El Niño outlook from strong to potentially very strong, increasing concerns over weather risks for the upcoming 2026/27 crop. A stronger El Niño raises the probability of prolonged dry conditions, elevated temperatures, reduced soil moisture, and increased crop stress across West Africa during key stages of pod development. Although the eventual impact remains uncertain, the heightened weather risk adds another bullish fundamental factor to a market already supported by improving demand and constrained producer selling.

Weather

The latest ECMWF seven-day accumulated rainfall forecast indicates generally favorable weather conditions across the main West African cocoa belt through approximately 17 July, although rainfall distribution remains uneven. The heaviest precipitation is expected across southern Guinea, Sierra Leone, Liberia, southern Côte d'Ivoire, Ghana, Togo, Benin, southern Nigeria, and western Cameroon, where widespread accumulations of 100–300 mm are forecast. These totals should maintain adequate soil moisture, support pod development, and minimize short-term moisture stress.

The core cocoa-producing regions of southern Côte d'Ivoire and Ghana are forecast to receive approximately 75–150 mm of rainfall, with localized totals exceeding 150 mm. These amounts are generally favorable for crop development, although isolated areas could experience temporary flooding or disruptions to field activities. Farther north, rainfall decreases to 10–50 mm across northern Côte d'Ivoire, Burkina Faso, Mali, and the Sahel, reflecting the normal northward transition of the West African monsoon. Since commercial cocoa production is concentrated farther south, these lower totals are unlikely to materially affect production. Overall, the near-term weather outlook remains neutral to slightly bearish for cocoa prices, as it supports favorable growing conditions and does not indicate widespread moisture stress across the principal producing regions.

Futures Performance

The comparison between the 07 July prices and the 08 July prices reveals a significant continuation of the bullish momentum that began earlier in the week. Rather than slowing after Monday's explosive rally and Tuesday's follow-through buying, cocoa futures accelerated higher on Wednesday, with substantial gains recorded across both the New York and London markets. The magnitude and consistency of these price increases indicate that buying interest remained exceptionally strong and that market participants continued to reprice cocoa higher across the entire forward curve.

New York Cocoa (CC)

In the New York market, every actively traded deferred contract posted gains of more than 250 points. September 2026 increased from 5,779 to 6,039, a gain of 260 points (+4.50%). December 2026 rose from 5,894 to 6,157, adding 263 points (+4.46%), while March 2027 climbed 271 points (+4.54%) to 6,237. May 2027 also advanced strongly, gaining 253 points (+4.24%) to finish at 6,224. The remarkably uniform advances across all maturities suggest that buying was not concentrated in the nearby contracts but instead reflected a broad upward repricing of cocoa's medium-term outlook.

London Cocoa (C)

London cocoa futures displayed even greater strength than New York. September 2026 rose from 4,260 to 4,519, an increase of 259 points (+6.08%). December 2026 advanced 253 points (+5.85%), March 2027 gained 251 points (+5.72%), and May 2027 also added 251 points (+5.73%). The fact that every contract appreciated by almost the same amount highlights a synchronized rally across the London forward curve. Moreover, London's larger percentage gains compared with New York indicate that European participants were even more aggressive in repricing cocoa during the session.

Another important observation is that the structure of the forward curve remained largely unchanged despite the sharp rally. Deferred contracts continued to trade above nearby maturities, preserving the market's upward-sloping curve. This suggests that traders are not reacting solely to short-term supply concerns but are increasingly pricing in tighter market conditions over the coming quarters. Had the rally been driven primarily by panic buying or a short squeeze, nearby contracts would typically have outperformed deferred months, causing the curve to flatten or invert. Instead, the nearly parallel movement across all contracts reflects a broad reassessment of future cocoa fundamentals.

EFP, EFS and Spread Activity

Trading activity indicates that the rally was driven primarily by outright futures buying, while commercial hedging and calendar spread trading remained active. Physical-related transactions (EFP and EFS) represented only a small proportion of total volume, suggesting that speculative and institutional buying dominated the session.

In New York, EFP activity totaled 655 contracts, with most transactions concentrated in the December 2026 contract. EFS activity was limited to 294 contracts, while spread volume reached 30,389 contracts, representing more than half of total futures volume. This high level of spread trading indicates active institutional positioning along the forward curve rather than disorderly speculative trading.

In London, EFP activity was significantly higher at 4,081 contracts, reflecting stronger participation from the physical cocoa trade. EFS activity remained modest at 342 contracts, while 24,564 spread contracts were traded. The elevated EFP volume highlights London's closer connection to the physical cocoa market, whereas the substantial spread activity suggests continued management of forward curve exposure by commercial firms and large investors.

US–UK July Spread

(Sep Contract)

$6,039 − (£4,519 x 1.339$/£) =$-12ton (down from $96ton)

Volume and Open Interest

The last five trading sessions reveal a significant increase in market participation as cocoa prices entered a strong bullish phase.

New York Cocoa (CC)

*Market closed for the U.S. Independence Day holiday.

In New York, trading volume more than doubled from 29,373 contracts on 02 July to over 63,000 contracts on 06 July, remaining elevated above 54,000 contracts through 08 July. At the same time, open interest increased steadily from 191,352 to 197,971 contracts by 07 July. This combination of rising prices, high trading volume, and expanding open interest is a classic indication of new long positions entering the market, suggesting that the rally was supported by fresh capital rather than simply by existing short positions being closed.

London Cocoa (C)

The London market displayed a similar pattern. Following the quieter holiday session on 03 July, trading volume recovered sharply and remained stable between 43,000 and 46,000 contracts throughout the rally. Open interest also increased from 231,842 contracts on 02 July to 234,948 contracts on 07 July, confirming that participation expanded alongside higher prices. The consistency between the New York and London exchanges strengthens the view that the bullish move was broad-based and supported by both financial and commercial participants.

Importantly, the available open interest data do not support the view that the rally was driven primarily by short covering. In a typical short-covering rally, prices rise while open interest declines because traders are closing existing short positions, reducing the total number of outstanding contracts. Instead, open interest increased steadily as prices accelerated, indicating that new buyers continued to enter the market, outweighing any reduction in short positions. While some short covering almost certainly contributed to the initial breakout, the subsequent rise in open interest suggests that the rally quickly transitioned into one driven by institutional accumulation and fresh long positioning.

Exchange Trading Volume

ICE Europe cocoa inventories rose sharply by 49,688 bags (+5.22%) to 1,000,938 bags. This is a notable milestone, as European exchange stocks climbed above one million bags for the first time since 17 June 2025.

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

Readers can explore detailed cocoa market datasets, futures statistics, and historical indicators in the CocoaIntel Data Hub:

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What to expect on Thursday

Thursday is likely to begin with consolidation after three consecutive strong bullish sessions, as short-term momentum indicators have cooled while the broader trend remains firmly positive. The daily and hourly charts continue to show a strong bullish structure, with prices holding above all major moving averages and On-Balance Volume confirming sustained accumulation. Any early weakness or sideways trading should be viewed as a healthy pause rather than a reversal, provided prices remain above the psychological 6,000 level. A decisive break above Wednesday's highs would likely trigger another wave of momentum buying and extend the rally, while a modest pullback would simply allow the market to digest recent gains before attempting another move higher. Overall, the technical outlook remains constructive, with the balance of evidence continuing to favor buyers.

If you notice any discrepancies in these figures or have extra information, please email [email protected] or leave a comment – corrections and additional insights are always welcome.