Key Highlights

● Cocoa rose 0.12% to US$5,652.04 a tonne Monday, after Friday's drop of about 3%.

● European third-quarter grindings rose 3.2%, the first annual gain since mid-2024.

● Early surveys point to an Ivorian 2026/27 crop about 18% smaller.

● ICE-monitored cocoa stocks reached a 2.25-year high of about 3.58 million bags.

Cocoa rose 0.12% to US$5,652.04 a tonne in Monday's session on 19 October, a small bounce that left the market almost where it ended Friday. The pause follows a sharp drop of about 3% on 16 October, and it matters to chocolate makers such as Hershey (NYSE:HSY), for which cocoa is a core input.

New York cocoa for December delivery (ICE Futures US, CCZ26) closed at US$5,645 a tonne on Friday, down US$186 on the day, so Monday's gain of US$7.04 barely dents the fall. London's December contract slipped £141 to £4,221 the same day, a similar drop of about 3%. Over a longer view the market is soft: cocoa is down 0.67% on the week, 7.04% so far this year and 4.42% from a year ago.

A Tug of War Between Demand and Supply

Cocoa is trading on two stories that point in opposite directions. Demand is recovering from a weak base and the next West African crop looks smaller, which supports prices. Warehouses are well stocked and this season's surplus is large, which holds them back.

Demand Is Returning, but Unevenly

The 15 October grinding data gave the clearest reading on demand. European processors ground 348,215 tonnes in the third quarter, up 3.2% from a year earlier and the first annual increase since the second quarter of 2024. The nine-month total is still the lowest since 2015, so this is a recovery from a low level.

The strongest numbers came from outside Europe. Asian grindings rose 29.2% to 233,767 tonnes, Malaysian grindings rose 47%, and Ivory Coast's own processors, reported by Gepex, rose 40.3%. Grindings track how much cocoa processors are using, so the figures show buyers returning after a weak spell. Cocoa still fell about 3% the following day.

A Smaller West African Crop Is the Main Concern

Most of the support comes from supply. Heavy rain in Ivory Coast, reported on 13 October, kept farmers out of fields, damaged roads and slowed deliveries to ports. Port arrivals were 23,000 tonnes in the latest week, 52% below a year earlier. Early surveys point to a 2026/27 Ivorian crop of about 1.8 million tonnes, roughly 18% lower, with Ghana at 650,000 tonnes, down 13%.

Weather could add to the strain. The US Climate Prediction Center expects a strong El Niño, which typically brings drier conditions to West Africa, and market commentary reports that NOAA raised the chance of an exceptionally strong event to 83%. Black pod disease, linked to cloudy weather, is also reported to be reducing bean quality.

Why Prices Have Not Run Higher

The supply worries meet a market that still holds plenty of cocoa. ICE-monitored inventories reached a 2.25-year high of about 3.58 million bags in a 13 October report, and Ivorian shipments for the marketing year are up almost 20% after a harvest that rose about 30%.

StoneX estimates a global surplus of 422,000 tonnes for 2025/26 but only 25,000 tonnes for 2026/27. That sharp narrowing is why each new crop estimate can move the market: little surplus is left to cushion a poor harvest.

What It Means for Chocolate Makers

Listed exposure sits with chocolate makers, which consume cocoa rather than grow it. Hershey and Mondelez International (NASDAQ:MDLZ) both buy cocoa as a core input and have flagged cost pressure and tariff uncertainty.

Their latest quarters show the trade-off between pricing and sales. Hershey's second-quarter gross margin rose 350 basis points to 41.6% on higher pricing, but volumes fell by about eight points. Mondelez's adjusted operating margin fell 120 basis points to 13.1%. A 9 October market report also noted that Cargill, a private trader and processor, reported mark-to-market losses on cocoa.

Cocoa Watch: Arrivals, Stocks and the December Roll

Weekly Ivorian arrivals, the next ICE inventory data and updated crop surveys for Ivory Coast and Ghana are the near-term guides, along with COCOBOD's projection of 450,000 to 550,000 tonnes for Ghana. Prices could firm if the main Ivorian crop proves smaller than surveys suggest, if dry weather persists or if grindings keep recovering. They could weaken if arrivals pick up and rains ease, if inventories keep rising or if chocolate makers cut volumes further in response to higher shelf prices.

The calendar matters too. The last trading day for London December cocoa is 14 December 2026, so traders move to the March 2027 contract before then. London deliveries also align with the EU Deforestation Regulation from 30 December 2026, and cocoa without validated due diligence data faces a £100 a tonne discount in 2027 contracts. The next results from Hershey and Mondelez will show how cocoa costs are feeding through to margins and volumes.