Realized volatility in cocoa futures has topped 90% in recent weeks, with daily price swings of 5-6% becoming the norm rather than the exception. London futures clawed back nearly 10% on Monday alone, a reversal that has all but erased the sharp rally seen in the final week of June.
The driver isn’t a single piece of news. It’s wide bid-offer spreads and thin liquidity, compounded by algorithmic traders and short-term speculators getting swept along for the ride, and exchanges raising margin requirements in response. Layered on top: conflicting signals from both sides of the market. Production reports point to improving but still-poor pod counts in West Africa, while demand data is just as mixed, grinding volumes are up but real appetite from chocolate makers stays lukewarm.
That tension showed up starkly in Europe’s second-quarter grind figures, which fell to their lowest level for the quarter outside the pandemic years since 2015, a steeper drop than analysts had expected. Asia told a different story entirely, posting its largest quarterly grind increase in at least a decade as processing capacity expands there. Ivory Coast’s own grind rose 22% year-on-year in June.
Major chocolate makers are responding by trying to insulate themselves from further swings. Mondelez says it wants to become a “less cocoa-reliant company,” leaning on reformulation and even cell-cultured chocolate technology, while Hershey points to better visibility into pod counts, weather, and fertilizer trends as tools for managing volatility rather than trying to time it.
The next crop is where the real question sits. NOAA’s outlook points to a strengthening El Niño through the rest of the year, a pattern that has historically dried out West African growing regions and hurt yields. StoneX now projects the 2026/27 season’s surplus shrinking to just 25,000 tonnes, down sharply from over 400,000 tonnes projected for the current season. For procurement teams still holding meaningful futures cover, the message from traders has been consistent for months: buy the dips when they come, because a calmer market doesn’t look imminent.
