Cocoa prices are poised for a sharp rebound through the second half of 2026 as recovering demand collides with worsening weather and production risks in West Africa, prompting BMI to raise its full-year price forecast by nearly 25%.
BMI has revised its 2026 average forecast for ICE-listed second-month cocoa futures to US$4,990 per tonne, up from its previous projection of US$4,000, as it expects the global cocoa surplus to shrink significantly in the 2026/27 season.
After cocoa averaged US$3,982 per tonne in the first quarter and US$3,933 in the second, BMI expects prices to average US$5,870 in 3Q26 before climbing to US$6,175 in 4Q26.
The research house expects the elevated price environment to extend into early 2027, forecasting cocoa futures to average US$5,670 per tonne next year.
“Our upward revision to the annual average reflects stronger market fundamentals, with firmer demand and a more constrained supply outlook tightening the market balance more rapidly than expected,” BMI said.
As of Aug 19, cocoa’s year-to-date average stood at US$4,338 per tonne, already above BMI’s previous full-year forecast.
West African Production Faces El Niño Threat
Central to BMI’s more bullish outlook is the deteriorating production picture in Côte d’Ivoire and Ghana, the two major West African cocoa producers.
BMI forecasts Côte d’Ivoire’s cocoa production to fall 17.5% year-on-year to 1.7 million tonnes in the 2026/27 season, while Ghana’s production is projected to decline 9.1% to 627,000 tonnes.
The research house said further downside risks remain as the crop enters a volatile weather period, with the potential strengthening of El Niño threatening yields.
As of August, the US Climate Prediction Center assigned a 95% probability of a very strong El Niño event during the key October-to-December cocoa development period, according to BMI.
Weather-related damage is already becoming evident. Surveys conducted in Côte d’Ivoire in late June found that more than 20% of cocoa flowers and young pods had died between May and June following heavy rainfall, which also encouraged the spread of black pod disease.
BMI expects the excessive rainfall to potentially be followed by drier conditions, similar to the pattern seen during the 2023/24 El Niño episode, raising the risk of moisture stress and weaker yields.
These weather pressures are compounded by structural constraints across West Africa, including ageing cocoa trees, limited irrigation and the industry’s heavy dependence on smallholder farmers.
As a result, BMI expects the global cocoa surplus to plunge to just 82,000 tonnes in 2026/27 from 442,000 tonnes in 2025/26, providing a considerably firmer floor for prices.
Demand conditions are also proving more resilient than previously feared, particularly outside Europe.
Combined cocoa grindings across Asia, Europe and North America reached 650,671 tonnes in 2Q26, up 6.1% year-on-year.
Asian grindings surged 25.1%, while North American grindings increased 7.7%. This contrasted with a 3.8% year-on-year decline in combined demand during the first quarter.
Europe remained the weak spot, with grindings falling 4.6% year-on-year to 316,366 tonnes.
BMI said the figures reinforce its view that global cocoa demand is stabilising, removing one of the major downside risks that had weighed on prices.
The improvement has been particularly visible in Malaysia and Indonesia, where industry participants have reported recovering consumption and continued expansion in downstream cocoa-processing activities.
Investor positioning is also becoming less bearish.
Managed money’s net short position reached a multi-year high of 27,286 contracts on June 9, before narrowing to 14,011 contracts by Aug 11, according to Commodity Futures Trading Commission data cited by BMI.
While speculative investors remained net short, BMI viewed the reduction as evidence that the strongly bearish sentiment prevailing earlier in 2026 was beginning to fade.
Prices Seen Peaking In Early 2027
BMI expects cocoa prices to remain elevated into the beginning of next year as the physical effects of El Niño on West African crops become clearer during the main harvest.
Its quarterly forecast puts cocoa at an average US$6,220 per tonne in 1Q27, before easing to US$5,750 in the second quarter, US$5,400 in the third and US$5,310 in the fourth.
However, BMI does not expect prices to return to the record highs associated with the 2023/24 El Niño episode because the market currently has a larger supply buffer.
Prices are expected to moderate through the second half of 2027 as El Niño dissipates and the weather-related risk premium unwinds, potentially setting the stage for better growing conditions in the 2027/28 season.
Even then, BMI expects cocoa prices to remain above pre-2024 levels over the medium to long term.
Expanding domestic processing capacity in major producing countries could reduce the amount of cocoa beans available for export, while the EU Deforestation Regulation is expected to increase compliance requirements and costs for cocoa destined for the European market.
BMI sees risks to its forecast as tilted to the upside, with a stronger-than-expected El Niño representing the biggest threat. Severe production losses in Côte d’Ivoire and Ghana could potentially eliminate the projected global surplus altogether.
A prolonged US-Iran conflict could provide an additional upside risk if it disrupts fertiliser availability ahead of the September main-crop application period.
Conversely, cocoa prices could come under pressure if El Niño proves weaker than currently anticipated, resulting in a more comfortable supply outlook and reducing the weather premium currently being built into the market.
