MARKET OUTLOOK · COCOA & CHOCOLATE · SUPPLY CHAIN & FREIGHT
The cocoa market has turned bullish again following the correction observed earlier in 2026. Recent developments indicate renewed concerns regarding the 2026/27 West African cocoa crop, which are expected to support higher cocoa bean and cocoa powder prices over the coming months.
West African Supply Outlook
Ghana’s Cocoa Board (COCOBOD) expects cocoa production for the 2026/27 season to decline by at least 16%. The anticipated reduction is attributed to several factors, including:
- El Niño-related weather risks
- Excessive rainfall
- Cocoa Swollen Shoot Virus Disease (CSSVD)
- Aging cocoa plantations
- Expansion of illegal mining activities, reducing available cocoa farmland
Similarly, Ivory Coast is forecasting a production decline of more than 10%, reinforcing concerns over global cocoa supply.
Barry Callebaut has indicated that significant crop losses caused by unfavorable weather could increase cocoa bean prices by several thousand pounds per metric ton.
Following the sharp correction earlier this year, cocoa futures staged a strong recovery during June and July. Heavy rainfall and flooding across Ghana and Ivory Coast triggered renewed supply concerns, causing cocoa futures to rebound by more than 70% within a few weeks before experiencing moderate profit-taking.
Despite this temporary correction, the overall market sentiment remains positive, with supply fundamentals continuing to support elevated price levels.
Although international oil prices have eased somewhat as diplomatic efforts have progressed and limited shipping activity has resumed, energy markets continue to include a significant geopolitical risk premium due to ongoing uncertainty in the Middle East.
Even if crude oil prices stabilize, freight costs are unlikely to decline in the short term. The primary reasons include:
- Higher war-risk insurance premiums
- Longer shipping routes as carriers avoid high-risk regions
- Reduced vessel availability
- Increased schedule uncertainty
Shipping companies have already reported renewed upward pressure on freight rates as tensions in the Middle East continue.
Two independent factors are currently exerting upward pressure on cocoa powder prices:
- Tight cocoa bean supply resulting from weak West African harvests.
- Rising logistics and energy costs increasing processing and transportation expenses.
As a result, cocoa powder prices may continue to increase even if cocoa bean prices temporarily stabilize.
Major cocoa processors—including Cargill, Barry Callebaut, and Olam Food Ingredients—are increasingly expected to:
- Shorten quotation validity periods (often to 24–72 hours)
- Reduce willingness to offer long-term fixed pricing
- Require faster order confirmations
- Expand the use of force majeure and price-adjustment clauses
These measures have become common practice during periods of elevated market volatility.
For food manufacturers and ingredient importers:
- Secure August–October cocoa requirements as early as possible.
- Expect suppliers to reduce quotation validity periods.
- Closely monitor weather developments in Ghana and Ivory Coast through September, as they will significantly influence fourth-quarter pricing.
- Consider earlier purchasing decisions where inventory and cash flow permit, reducing exposure to both commodity and freight market volatility.
Outlook
The cocoa market is expected to remain fundamentally bullish over the coming months. While energy prices may stabilize if geopolitical tensions ease, freight costs are likely to remain elevated because of ongoing shipping disruptions and insurance costs. At the same time, tight West African cocoa supplies continue to support higher cocoa bean prices.
Overall, freight costs are expected to increase more rapidly than manufacturing costs during the next two to three months, while cocoa powder prices are likely to remain under upward pressure due to the combined effects of constrained cocoa supply, elevated logistics expenses, and continued market uncertainty.
