Cocoa Market Review August 2026
OVERVIEW
Cocoa was largely rangebound through August before a strong rally over the final two to three sessions. December London settled at £4,859, up £794 on the month, and December New York at $6,771, up $1,235. The move brought the first real interest from managed money on the long side in months, the combined net short more than halving to 10,240 lots by 1st September, its smallest since October 2025. El Niño strengthened further and the trade increased its estimated deficit for 2026/27, though the physical evidence of the current season’s surplus remains in place. That split runs through the structure, with the nearby positions still pricing comfortable availability while the forwards price the risk to next season’s crop, alongside the regulatory dynamics of the market. New York forward positions strengthened relative to London over the month, which we would expect to reverse as EUDR takes effect.
FLAT PRICE & POSITIONING
Up to 25th August managed money had been extending its net short position following the reduction in July, the combined net short widening 3,243 lots from 18,485 at the end of July to 21,728. Managed money added on both sides in both markets. New York added 2,756 gross shorts and 2,256 gross longs, which largely offset and left the net unchanged at 14,627, while London added 3,701 gross shorts against only 958 longs, taking its net short from 4,358 to 7,101 lots. The rally from 27th August to the end of the month coincided with the first sign of real interest from managed money on the long side. In the week to 1st September the number of managed money long traders rose by 16 to 78 across both markets, with 7,134 lots of fresh longs added against 4,354 lots of short covering. New York gross longs rose 3,951 lots to 20,837 while gross shorts fell 1,751 to 29,762, and London gross longs rose 3,183 to 8,930 while gross shorts fell 2,603 to 10,245. That took the New York net short to 8,925 lots and London to 1,315, a combined 10,240 lots and the smallest it has been since October 2025.
Forward selling remained largely absent through the month, with the CCC having sold the 2026/27 main crop and Ghana largely done as well. Spot selling from other origins will start to grow over the coming weeks as we enter the 2026/27 crop, which should provide some resistance on the upside, though not enough volume to cap it. Industry, meanwhile, gave up some cover at the end of the month, although they still hold relatively good cover. With price already suggesting a shortfall, they appear content to wait rather than pay for a crop that has yet to be proven, and whether they achieve lower prices or are forced into the market will probably depend on early Ivory Coast arrivals.
2025/26 SUPPLY: SURPLUS, ARRIVALS & GRIND
Ivory Coast arrivals ended the season at 2 million tonnes, up roughly 20% on last year. August arrivals slowed to 20,500 tonnes against 52,000 tonnes a year earlier, which may reflect cocoa being held back in anticipation of a higher farmgate price, which did not materialise. Ghana closed its season at approximately 750,000 tonnes, up 25.6% from 597,000 tonnes in 2024/25. Ecuador’s July exports of beans and products reached 41,744 tonnes, 2.6% below July 2025, taking cumulative exports for the first ten months to 484,708 tonnes, 3.8% ahead of last year. Nigeria’s July exports came in at 16,052 tonnes, up 18% on last year. Cameroon disappointed, production falling 19.9% to 247,914 tonnes, the smallest crop in five years, with exports down 34.7% to 125,469 tonnes.
Ivory Coast grind for July came in at 60,263 tonnes, up 53.3% against a soft base, taking cumulative grind to 553,731 tonnes, up 7.5% on the season. Cameroon grind for 2025/26 finished at 95,946 tonnes, down from 110,388 tonnes the year before.
US warehouse stocks ended August at 3,411,016 bags, a build of 45,353 bags on the month. While that represents a slowdown in the rebuild, August typically sees a drawdown, with a median change of minus 196,177 bags, so a flat to positive month is itself an anomaly. The level nonetheless remains historically low at 3.4 million bags against a ten-year August average of around 4.16 million.
2026/27 OUTLOOK: POD COUNTS, EL NIÑO & DEMAND
Market estimates for the 2026/27 crop continue to span a wide range. Hedgepoint estimates a surplus of 111,000 tonnes, while Guan Chong has announced it is looking at a deficit of 300,000 to 400,000 tonnes, and we hear rumours of others in the market working to something similar. That is the first named forecast that gets close to justifying these levels. General consensus, however, sits at a deficit of 150,000 to 250,000 tonnes, which would still leave the market with comfortable stocks.
The driver is the poor early pod counts combined with the expected impact of El Niño on the mid crop. NOAA now puts the probability of a very strong event during the northern hemisphere autumn and winter at greater than 90%, up from 81% for October to December cited last month. It now also assigns a 69% probability to a historic event during October to December, defined as a three-month RONI value of +2.5°C or above, which would exceed the strength of every El Niño back to 1950. July index readings were +1.4°C for Niño-3.4, +1.7°C for Niño-3 and +2.9°C for Niño-1+2, against +1.2°C and +2.7°C last month.
The ECMWF seasonal forecast, run from 1st September, sets out where the risk sits. Over October to December the signal for Ivory Coast and Ghana is favourable for rainfall, with a 40 to 50% chance of better than normal rainfall. For January to March that reverses, below normal becoming the most likely category, with the probability of falling in the lowest 20% of precipitation at 30 to 50% across Ivory Coast and 50 to 70% in Ghana. Conditions look adequate for the main crop, while the risks build over the Harmattan and the period in which the mid crop develops. Indonesia carries the strongest dry signal of the origins, at a 70 to 100% probability of falling in the lowest 20% of precipitation over October to December, though that eases considerably by the first quarter. In Ecuador the risk is excess rainfall, with coastal areas carrying a 70 to 100% probability of falling in the highest 20% of precipitation for January to March, which covers the heart of the wet season on the coast. The measure to watch is Niño 1+2 sustained through the wet season rather than the peak: only two events in the past 45 years have held above +3.0°C across it, 1997-98 and 1982-83, delivering rainfall 162% and 106% above the neutral-year average.
The 2026/27 main crop farmgate price looks to be unchanged at 1,200 CFA/kg, most of the CCC’s 2026/27 sales having been concluded well below current levels. Ivorian farmers again aren’t getting the full benefit from these high prices, and we would expect to see smuggling into Ghana, Liberia and Guinea. Overall this is bullish for the market, with Ivorian arrivals likely to understate the crop and farmers poorly incentivised to invest at these prices.
On demand, the recovery will be hurt by these high prices. A study of Christmas chocolate published during the month showed tubs of Cadbury Roses and Heroes and Celebrations shrinking by up to 14% compared to last year with no reduction in prices. That is consistent with our view that manufacturers are unlikely to make the costly move back from reformulated products with prices at these levels and the uncertainty around 2026/27 cocoa production.
In the near term we are looking at early Ivory Coast arrivals, which are expected to be disappointing following the poor early pod counts, and keeping a close eye on weather forecasts over the next six months. The Harmattan period is showing signs of drier than normal conditions, while in Ecuador we are watching for any significant rainfall anomaly through the wet season. Our view for now is wait and see. It needs to be a large deficit for prices to remain here or rally on fundamentals, and good Ivory Coast arrivals or an improved weather outlook could see flat price retreat.
MARKET STRUCTURE
The structure continued to reflect the split running through the whole market, with the nearby positions pricing the 2025/26 surplus and the 2027 positions pricing the threat to the 2026/27 crop, alongside EUDR and the ICE delivery limits.
LONDON
August saw 7,410 tonnes graded, of which 6,780 tonnes passed and 630 tonnes failed. Of the passed grading, 5,080 tonnes was initial grading, comprising 2,400 tonnes Ivory Coast, 1,680 tonnes Nigeria and 1,000 tonnes Peru, with the balance of 1,700 tonnes re-grades, 1,000 tonnes Ecuador and 700 tonnes Nigeria. Certified stocks ended August at 86,790 tonnes, a build of 720 tonnes on the month, of which 75,550 tonnes carried a valid certificate, 46,230 tonnes initial and 29,320 tonnes perpetual. The September/December spread (UZ) settled at -£86, weakening £32 on the month. Our view here is unchanged: with cheap differentials, any strengthening in September is likely to attract more grading and, with 20,310 tonnes expiring in September including 8,900 tonnes of Nigeria, this should keep a lid on the September structure. The grading that took place at the end of August, and the grading in the pipeline, supports this. December remains the last expiry before EUDR takes effect. The December/March spread (ZH) settled at – £124, weakening £39 on the month. 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, and this should continue to weigh heavily on the December 2026 structure along with the 25,920 tonnes expiring in December 2026. Further out, March/May 2027 settled at +£3, up £6, May/July 2027 at +£27, up £24, July/September 2027 at +£94, up £62, September/December 2027 at +£166, up £136, December 2027/March 2028 at +£28, up £47, and March/May 2028 at +£74, up £57. The £100 discount does not prevent non-compliant cocoa being delivered against the 2027 contracts. If holders carry cocoa rather than delivering to December 2026, that will weigh heavily on the 2027 structure until the non-compliant cocoa is delisted. If, on the other hand, non-compliant cocoa dries up in 2027, we could expect those positions to become extremely tight, with the increased delivery limits adding to that. The structure as it stands is pricing restricted supply of EUDR compliant cocoa as well as production being hit by El Niño. The relative weakness of December 2027/March 2028 is due to December 2027 being the last contract to which non-compliant cocoa can be delivered.
NEW YORK
553 lots were delivered against September New York by the end of August. Availability against September 2026 stands at around 4,876 lots, led by Ecuador at 3,258 lots. In August 2,736 lots were graded, all of which expires in December 2026, including 946 lots of Ecuadorian initial grading and 916 lots of Ecuadorian re-grades. The structure in New York followed a similar pattern to London, with December/March (ZH) at -$134, weakening $42, and March/May 2027 at -$50, weakening $33. The forwards strengthened, with September/December 2027 at +$128, up $91, and March/May 2028 at +$81, up $56. With over 2,736 lots available to December, Ecuador trading at origin at 500 under Z26 New York, and improving US stocks, we expect the nearby structure to remain weak.
ARBITRAGE
The arb moved sharply in the forwards over the month, with New York now at a substantial premium to London. May 2027 went from £40 to £54, July 2027 from £31 to £69, September 2027 from £45 to £104, March 2028 from £27 to £140, May 2028 from £25 to £149 and July 2028 to £155. The front was unchanged by comparison, December 2026 finishing at £45 against £46 at the end of July and March 2027 narrowing from £29 to £21. We would anticipate this to weaken as a result of EUDR, with non-compliant cocoa increasingly finding its way to the US. Reports from Nigeria suggest only around half of the crop will be EUDR compliant, and if that estimate is close the volume involved is significant. That should build New York stocks and weigh on the New York structure. This view is barring any catastrophic impact to production in South America. December 2027 is different at £182. It is the last contract to which non-compliant cocoa can be delivered, so anything left could be dumped onto it, which keeps London December 2027 weak relative to the surrounding structure.