Cocoa Market Review June 2026

OVERVIEW

June saw a strong rally in cocoa, the market breaking through May’s highs as poor pod counts in West Africa pointed to a much smaller 2026/27 crop. NOAA confirmed an El Niño, now with an increased probability of a very strong event, which added further risk on top. The market is now caught between a large 2025/26 surplus and fears over a much smaller 2026/27 crop.

FLAT PRICE & POSITIONING

June was a tale of two halves. New York September settled the month at $5,078, up $1,079, having traded as high as $5,343; London September closed at £3,817, up £863, breaking decisively through the May highs. Through the first half of the month, however, the market was quiet, holding around $3,800 to $3,900 basis New York September, roughly £2,850 to £2,950 in London, the levels at which we had identified industry support in late May. This is precisely where industry stepped in, providing strong support to the market.

Through that first half, managed money was extending its short position, particularly in New York. By 9th June the New York net managed money short position had reached 27,286 lots, it’s most extreme since November 2022, with the combined net short position at around 47,700 lots.

The second phase began mid-month as the poor pod counts came through. The market broke sharply higher, pushing up through $4,200 basis September and running towards $5,300. The initial leg of the breakout was led by fresh managed money longs coming in rather than short covering; as the rally extended, the shorts began to cover, and the combined net short reduced to around 38,000 lots by 23rd June.

Origin was active throughout. Even in early June, as industry bought, origin was selling, though industry buying outpaced it at that stage and the market held. As prices ran higher through the second half of the month origin selling accelerated. The balance therefore shifted over the month, from industry buying dominating early, to origin hedging dominating late into the rally.

On forward sales, the CCC is believed to have sold around 1.3 million tonnes of the 2026/27 main crop and, given the poor pod counts, is likely largely done for now, which clears much of the main crop selling overhang. Ghana is less clear, though we understand it has looked to lift the differential at which it is selling since the rally. With that overhang largely out of the way, forward origin pressure has thinned.

Industry kept in touch as the market rallied, though in smaller volume than earlier in the month, the poor pod counts and the increased probability of a very strong El Niño having brought them in at higher levels. Given this support from industry and the speculative short positioning the market can push higher in the near term especially with the CCC largely done selling the 2026/27 main crop, the origin selling that would normally cap a rally has thinned. That combination can carry the market higher. A retracement cannot be ruled out, but we would expect industry to support any dip. The thing that would alter this view is if the July pod counts improve, Industry may not participate as they have good cover mostly at lower levels than here, although the threat of a strong El Niño would still hang over the market.

 2025/26 SUPPLY: SURPLUS, ARRIVALS & GRIND

The 2025/26 picture is little changed from last month, and if anything, the surplus has edged marginally higher. Market estimates still span a wide range, from around 350,000 to 600,000 tonnes; drawing on the consensus, we would place the surplus at around 500,000 tonnes.

Ivory Coast arrivals continued to run well ahead of last year. June arrivals reached 119,000 tonnes against 72,000 tonnes in the same period last year, taking cumulative arrivals for the season to around 1,908,000 tonnes. This reflects a strong mid-crop coming through, running well ahead of last year and confirming the surplus we expected to become most visible during this period.

Ecuador bean and product exports for May came in at 36,450 tonnes, slightly below the 38,351 tonnes of May last year. Nigeria cocoa bean exports for May were at 18,034 tonnes, up 28% year on year.

US warehouse stocks reached around 2.95 million bags by the end of June, and continued to build through the month, when they would typically begin drawing down from the May peak. That said, stocks remain well below the seasonal average of around 4.5 million bags for the time of year, so whilst US warehouse stocks are recovering well, the absolute level is still historically low.

Ivory Coast May grind came in at 55,769 tonnes, up around 40% on May 2025. Taken together, April and May, the first two months of Q2 are running around 31% ahead of the same period last year, and cumulative grind for the season now stands marginally ahead at 437,118 tonnes against 429,577 tonnes. As we noted last month, this partly reflects the shift in grinding dynamics we have been seeing, with cheap origin differentials and the larger crop redirecting grinding activity back to Ivory Coast from Europe. The next read comes in July with the release of the second quarter grind figures for Europe, North America and Asia, which will be a clearer test of demand through the first half of the year.

2026/27 OUTLOOK: POD COUNTS, EL NIÑO & DEMAND

The 2026/27 crop is now the market’s central focus, and June brought the first hard signals that it may fall short. Early pod counts across West Africa came in poor, with some in the market drawing comparisons to 2023/24. Based on the pod counts the market is estimating an Ivory Coast 2026/27 crop of 1.7 to 1.8 million tonnes, this is before any impact from El Niño on production, and this is what has driven the recent rally.

There is still a chance that the July pod counts could look better. A strong mid-crop can delay the onset of the new main crop. The July pod counts will be more decisive and are likely to set the picture for the season.

El Niño is now confirmed. NOAA moved to a formal El Niño Advisory in June, with conditions present and expected to strengthen into the winter. The latest reading puts the Niño-1+2 index at +2.1°C, and NOAA now sees a 63% chance of a very strong event during November to January, which would rank among the largest in the record since 1950. This is a decisive shift towards the severe end of the range from the strong to very strong probabilities cited last month, and it stacks a clear production risk on top of an already anticipated smaller crop. Historically the impact El Nino has on production scales with the strength of the event; a strong to very strong El Niño can significantly reduce output.

The ECMWF seasonal forecast for October to December shows the impact of El Niño, with a high probability of above normal rainfall over coastal Ecuador and below normal rainfall over Indonesia. The greatest risk from El Niño comes later in the season, when it is forecast to peak. In Ecuador specifically, the risk of flooding rises once Niño 1+2 pushes above +2°C during the October to February wet season. For West Africa, the outlook remains neutral to slightly better for rainfall through the coming months, with the greater risk coming later, in the December to February Harmattan period rather than the early development of the main crop.

On demand, there was little fresh to note this month. The market had been anticipating a recovery in 2026/27, of around 5%, on the back of the relatively low prices seen through the first part of 2026 compared with the prior two years. Should prices sustain these levels or continue to rally, that recovery is at risk.

The cushion from the 2025/26 surplus is significant, and the market could absorb a small to moderate 2026/27 deficit without much trouble. For current prices to be justified, the deficit will need to prove large. That is a real possibility: should the July pod counts reinforce June’s, the concern becomes serious, and that is before any El Niño impact is added. For now, positioning and momentum are holding prices above what the fundamentals alone would support, and whether that is sustained rests on the crop delivering a shortfall large enough to warrant it.

MARKET STRUCTURE

The structure reflected the split running through the whole market: the nearby positions priced the 2025/26 surplus, while the 2027 positions increasingly priced the threat to the 2026/27 crop, alongside the implementation of EUDR and the ICE position limit changes. In London the July/September spread (NU) firmed early in the month, trading to a high of +£31, before weakening back to settle at -£1, down £22 on the month, as grading came through. June saw 16,020 tonnes graded in total, of which 15,390 tonnes passed. Of the passed grading, 8,950 tonnes was initial grading, which goes against the December expiry, with the balance re-grades. The initial grading was predominantly Nigerian and Ivorian, Nigeria alone accounting for 4,770 tonnes. This followed the pattern we flagged last month, when we noted the NU backwardation looked artificial and, given cheap differentials and the surplus, was likely to attract selling. The September/December spread (UZ) settled at -£62, weakening through the month, with a large September expiry of around 23,340 tonnes (Nigeria being the dominant origin) weighing on the nearby structure. Our view here is unchanged: any strengthening in September is likely to attract more grading and should keep a lid on the September structure.

December is the last expiry before EUDR takes effect, and the December/March spread (ZH) settled at      -£61. Non-compliant cocoa carries a £100 per tonne discount when delivered against 2027 contracts, so holders have reason to deliver to December 2026 unless the spread pays them to carry into 2027; this should weigh heavily on the December 2026 structure.

The 2027 spreads strengthened over the month. This happened almost instantly after ICE raised the delivery limits for 2027 contracts (3,750 lots for March, 5,000 for May and 7,500 for the rest), as the pool of compliant deliverable cocoa is likely to shrink following EUDR’s requirements, but the worsening outlook for 2026/27, following June’s pod counts and the confirmation of El Niño, has also contributed to the picture. Again, we would reiterate that meaningful volumes of non-compliant cocoa may still find their way to 2027 delivery, particularly if the Z/H switch comes to offset that discount, and the timing of EUDR is not yet certain.

New York structure remained weak nearby, though unlike last month the forwards firmed into backwardation as the 2026/27 concern fed through. The July/September spread (NU) settled at -$76, September/December (UZ) at -$110 and December/March (ZH) at -$78, while the 2027 spreads strengthened, the March/May 2027 spread settling at -$12, up $23 on the month, and May/July 2027 at +$10, up $30. July delivery has begun, with 359 lots of delivery notices, of which 286 lots are Ecuador, and around 2,166 lots are available to September 2026, again predominantly Ecuador, though much of this is re-grades rather than fresh supply. Ecuador continues to trade under tender parity at origin, at around $320 under September, which should continue to suppress U26.