Dollar Weakness Sparks Short-Covering in Cocoa Futures

July ICE NY cocoa (CCN26) on Monday closed up +103 (+2.73%), and July ICE London cocoa #7 (CAN26) closed up +86 (+2.98%).

Cocoa prices jumped to 1.5-week highs on Monday and settled sharply higher as dollar weakness sparked short covering.  The dollar index ($DXY) fell to a 1-week low on Monday, a supportive factor for most commodity prices. 

An excessively short position by funds could exacerbate any short-covering rally in cocoa.  Last Friday’s weekly Commitment of Traders (COT) report showed that funds increased their short positions in NY cocoa by 6,175 in the week ended June 9 to 27,286 net-short positions, the most in more than three years.

Cocoa prices tumbled to 3-week lows last week amid signs of abundant supply.  Last Thursday, the Ivory Coast boosted its estimate of cocoa that has reached its ports by more than 260,000 MT so far this season. Cumulative data from the Ivory Coast now show that farmers shipped 1.95 MMT of cocoa to ports in the current marketing year (October 1, 2025, through June 7, 2026), up +18.9% from the same period a year ago.  The Ivory Coast recently said its cocoa production in 2025/26 would fall -10.8% y/y to 1.65 MMT from 1.85 MMT in 2024/25. 

Cocoa prices have underlying medium-term support from weather concerns.  Last Wednesday, Japan’s Meteorological Agency confirmed an El Niño weather pattern had formed across the equatorial Pacific.  The formation of an El Niño weather pattern could lead to warmer, drier conditions in West Africa, potentially damaging cocoa production there.  The US National Oceanic and Atmospheric Administration (NOAA) estimates a 67% chance of a “Super El Niño” this year, one of the strongest ever recorded. 

Cocoa prices also have support from early surveys of the 2026/27 West African cocoa crop, which show below-average cherelle formation on cocoa trees, signaling a weak outlook for the main cocoa harvest, which begins in October. 

Rising cocoa inventories are also bearish for prices.  ICE cocoa inventories rose to a 1.75-year high of 2,929,074 bags on June 5 and were just slightly below that level at 2,917,793 bags on Friday.

The prolonged closure of the Strait of Hormuz is disrupting global cocoa supplies and also supporting prices.  The closure of the strait supports cocoa prices by reducing fertilizer supplies, boosting global shipping rates, insurance costs, and fuel prices, thereby raising cocoa importers’ costs. 

Weak global cocoa demand is bearish for prices.  The National Confectioners Association reported April 23 that North American Q1 cocoa grindings fell -3.8% y/y to 106,087 MT.  Also, the European Cocoa Association reported that Q1 European cocoa grindings fell -7.8% y/y to 325,895 MT, a bigger decline than expectations of -6% y/y and the lowest for a Q1 in 17 years.  Conversely, the Cocoa Association of Asia reported that Q1 Asian cocoa grindings unexpectedly rose +5.2% y/y to 223,503 MT, stronger than expectations of a decline of -6.7% y/y. 

Smaller cocoa supplies from Nigeria, the world’s fifth-largest cocoa producer, are supportive for prices.  On May 28, Bloomberg reported that Nigerian cocoa exports in April fell -20% y/y to 14,921 MT.  Nigeria’s Cocoa Association projects that Nigerian cocoa production in 2025/26 will fall by -11% y/y to 305,000 MT, from a projected 344,000 MT for the 2024/25 crop year. 

In February, Ghana cut the official price it pays its cocoa farmers by nearly 30% for supplies for the 2025/26 growing season.  In March, the Ivory Coast also said it would cut cocoa farmers’ pay by 57%, effective for the mid-crop harvest that began in March.  The Ivory Coast and Ghana produce more than half of the world’s cocoa. 

The outlook for a smaller global cocoa surplus is supportive of cocoa prices.  On April 29, StoneX cut its 2026/27 global cocoa surplus estimate to 149,000 MT from a January forecast of 267,000 MT, citing risks to the West African cocoa crop from an expected El Niño weather event.  StoneX also cut its 2025/26 global cocoa surplus forecast to 247,000 MT from a January estimate of 287,000 MT.