Cocoa Prices Slump 23% as West African Supply Rebuilds

Cocoa futures prices have declined sharply, with the benchmark July 2026 ICE contract falling to $9,800 per metric ton by May 20, 2026. This represents a 23% correction from the record highs above $12,700 per ton set in early April. The price action was reported by investing.com on May 20, 2026, and reflects a significant reversal in a market that had been gripped by a historic supply crisis. The pullback signals a potential turning point for global chocolate manufacturers and consumers after two years of extreme cost pressures.

Context — [why this matters now]

The recent price correction interrupts the most severe bull run in cocoa's modern trading history. The last comparable price surge occurred in the 1976-1977 season, when prices spiked roughly 260% due to drought in Ghana. The current macro backdrop features elevated global food inflation, with the UN Food and Agriculture Organization's Food Price Index averaging 8.4% higher year-on-year in Q1 2026.

Two consecutive seasons of devastating crop disease and adverse weather in Ivory Coast and Ghana, which produce over 60% of the world's cocoa, created the initial deficit. The primary catalyst for the current sell-off is a measurable improvement in West African supply prospects. Improved rainfall patterns in April and May across key growing regions have supported the mid-crop harvest.

Concurrent reports indicate a rebound in port arrivals in Ivory Coast. Shipments for the April-May period are estimated 15% higher than the same dismal period last year. This tangible evidence of supply recovery has triggered long liquidation from speculative funds that had built record bullish positions.

Data — [what the numbers show]

Price data illustrates the magnitude and velocity of the decline. The July 2026 ICE cocoa contract settled at $9,800 per metric ton on May 20. That marks a decline of $2,900, or 23%, from the April 3 intraday peak of $12,700. The contract remains up 142% year-on-year, demonstrating the extreme base from which the correction began.

Open interest across ICE cocoa futures has fallen by 18,000 contracts, or 12%, since the April peak, indicating substantial position unwinding. The price ratio between the near-month July contract and the December 2026 contract has narrowed from a backwardation of $1,200 to $450, signaling reduced immediate supply panic.

For comparison, the broader Bloomberg Commodity Index is down 2.1% year-to-date, while cocoa remains the index's top performer despite the recent drop. The July-December 2026 spread contraction is a critical data point, showing a shift in market structure from extreme shortage pricing to a more balanced forward curve.

Metric	April 3 Peak	May 20 Close	Change
July 2026 Futures	$12,700/ton	$9,800/ton	-$2,900 (-23%)
July-Dec 2026 Spread	$1,200 Backwardation	$450 Backwardation	Narrowed $750

Analysis — [what it means for markets / sectors / tickers]

The price correction directly benefits major chocolate and confectionery manufacturers. Hershey (HSY) and Mondelez International (MDLZ) have guided for a 300-400 basis point gross margin expansion for fiscal 2026 if cocoa averages below $10,000 per ton in H2. European chocolate makers like Barry Callebaut (BARN.SW) and Nestlé (NESN.SW) also face reduced input cost pressure.

Specialty chocolate producers and craft bean-to-bar manufacturers, which often lack long-term hedging programs, will see more immediate relief on spot purchases. A key risk to this optimistic outlook is that the supply recovery remains fragile. Any return of adverse weather or disease in West Africa could quickly reverse the price trend before the main crop harvest later this year.

Positioning data from the Commodity Futures Trading Commission shows managed money net long positions in cocoa fell by 32,000 contracts in the two weeks to May 16. This represents the largest two-week liquidation since 2018. Flow is rotating out of pure-play cocoa longs and into relative value trades, such as long chocolate manufacturers against short cocoa futures.

Outlook — [what to watch next]

The next major catalyst is the release of the International Cocoa Organization's quarterly supply and demand forecast on June 25, 2026. This report will provide official estimates of the global deficit for the 2025/26 season. The European Cocoa Association's grind data for Q2, due July 15, will indicate whether high prices have permanently damaged consumption.

Price levels to watch include technical support at $9,200 per ton, the 100-day moving average. A break below this level could target $8,500. Resistance sits at $10,800, the previous consolidation zone from March. The direction of the forward curve will be critical.

If the July-December spread moves into contango, it would signal the market believes the worst of the shortage has passed. The progress of the mid-crop in West Africa over the next four weeks will determine near-term price direction before attention shifts to the main crop flowering period.

Frequently Asked Questions

How will lower cocoa prices affect chocolate bar costs for consumers?

Consumer price changes lag commodity moves by 6-9 months due to existing forward contracts and retail pricing cycles. Major brands that raised prices 15-20% over the past year are unlikely to cut them. Instead, expect price stabilization and potential increases in product size or promotion frequency. Retail chocolate prices are sticky on the way down as companies seek to rebuild margins eroded during the commodity spike.

What is the historical average price for cocoa futures?

Before the 2024-2026 crisis, cocoa futures traded in a range of $2,000 to $3,000 per metric ton for most of the prior decade. The rally to over $12,000 was a 4-6 standard deviation event. The 20-year average price from 2004 to 2023 was approximately $2,800 per ton. The current price near $9,800 remains over three times this long-term average, indicating the market is still pricing in a structural deficit.

Which public companies are most exposed to cocoa price volatility?

Pure-play exposure is limited. The most direct listed equities are cocoa processors like Singapore-based Olam Food Ingredients (OFI), which is sensitive to grinding margins. Chocolate manufacturers like Hershey and Mondelez are more impacted, but their diversified portfolios dilute the effect. For a deeper look at commodity-driven equities, explore Fazen Markets' analysis on softs exposure. Exchange-traded funds like the iPath Bloomberg Cocoa Subindex Total Return ETN (NIB) provide direct, albeit complex, price tracking.

Bottom Line

The cocoa market's sharp correction reflects tangible supply improvement, but prices remain elevated versus history, sustaining pressure on manufacturers.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.