El Niño reinforces uncertainties in the global cocoa market.

The global cocoa market remains pressured by technical factors and expectations of a global surplus, but continues to be highly sensitive to weather conditions in key producing regions. Analysis by Hedgepoint Global Markets indicates that, while current fundamentals point to a bearish scenario for prices, factors such as the forecast of below-average rainfall in West Africa and the increasing likelihood of El Niño formation could sustain episodes of volatility over the coming weeks.

Cocoa futures contracts closed the week of May 29th quoted at $3.923/t in New York and GBP 2.975/t in London. For the month, prices registered increases of 12,3% and 13,5%, respectively. Despite comments about a possible larger harvest in Ivory Coast and concerns about the quality of cocoa beans produced in West Africa, there were no significant changes in market fundamentals.

According to Carolina França, Market Intelligence analyst at Hedgepoint Global Markets, the market remains vulnerable to changes in perception, especially when weather factors come into play. "The market has been guided by technical factors and the macroeconomic scenario, including covering short positions and adjusting positioning," she assesses.

Weather conditions remain a central focus for the sector. In Ivory Coast, the world's largest cocoa producer, rainfall volumes remain above those recorded in the previous cycle and close to the historical average. In Ghana, rainfall is also above average, a scenario considered positive for crop development, although it requires monitoring due to the potential increase in disease incidence and impacts on the harvest.

Despite the favorable scenario so far, weather forecasts indicate below-average rainfall for parts of West Africa in the coming weeks. This period is considered critical for the development of the next 2026/27 crop, as it corresponds to the flowering phase of the plants that will give rise to the main harvest, expected to begin in October. If the reduction in rainfall persists throughout June, crop development could be affected, providing additional support to cocoa prices.

"Weather conditions in West Africa remain favorable so far, but require monitoring due to the risk of below-average rainfall in early June in some regions," emphasizes the Hedgepoint expert.

El Niño forecast keeps market volatile.

Another relevant factor is the increasing expectations for the formation of El Niño. The United States National Oceanic and Atmospheric Administration (NOAA) has raised the probability of the phenomenon developing between May and July to 82%, with the possibility of it persisting during the winter of 2026/27 in the Northern Hemisphere. Projections also indicate that the sea surface temperature in the Niño 3.4 region could exceed 1,5°C and reach up to 2°C from September onwards, characterizing a strong or very strong event.

The potential impacts of El Niño vary depending on the producing region. In general, the phenomenon tends to favor drier conditions in parts of West and Central Africa, Central America, and northern Brazil, while it can increase rainfall in Peru, Ecuador, and parts of Africa. Furthermore, there is a possibility of more frequent heat waves in South America and the African continent.

The analyst also states that, since the effects depend on the intensity of the event, its interaction with critical phases of crop development, and local climatic phenomena such as the Harmattan winds and the West African Monsoon, climate monitoring will continue to be fundamental for the market. "The expectation of an El Niño formation reinforces uncertainty, as its impacts vary by region and can intensify market volatility," she adds.

In the short term, price dynamics are expected to continue to be influenced by a combination of technical factors and weather-related news. Although expectations of a global surplus and high certified inventories in New York maintain a bearish bias for futures contracts, any changes in weather conditions could trigger corrective movements and further price fluctuations.

"Short-term price dynamics tend to depend on the interaction between technical factors and weather news, with the market reacting quickly to any change in perception about supply and demand," explains the Market Intelligence analyst at Hedgepoint Global Markets.

Thus, even in a scenario of partial recovery in global supply, the cocoa market remains sensitive to climate risks. For the coming months, the evolution of weather conditions in West Africa, the behavior of El Niño, and demand are expected to remain among the main factors monitored by producers, exporters, and investors.