Cocoa Market Faces Ongoing Supply Constraints
Wells Fargo has released a fresh assessment of the global cocoa market, indicating that limited inventories could continue to underpin cocoa prices despite the commodity’s sharp decline from record highs.
The bank noted that cocoa prices have rebounded in recent weeks after retreating significantly from the historic surge seen in 2024. Following several years of trading within a range of roughly $2,000 to $3,000 per metric ton, cocoa prices climbed to nearly $13,000 per metric ton in early 2024.
Although prices later eased and returned to around $3,000 per metric ton beginning in late 2025, recent market activity has pointed to renewed strength.
El Niño Remains a Key Risk for Production
Wells Fargo highlighted weather risks as a major factor influencing the market outlook, particularly the growing likelihood of an El Niño event.
According to data from NOAA, there is an approximately 80% probability that El Niño conditions will develop this year. Historically, such events have negatively affected cocoa production in key growing regions.
Barry Callebaut, the world’s largest cocoa bean processor, said last week that it is “watching the potential effect of El Niño,” although the company continues to forecast a global cocoa surplus this year.
El Niño conditions are often associated with hotter and drier weather patterns in major cocoa-producing countries and have coincided with notable production shortfalls in both 2016 and 2024.
Inventories Could Fall to Record Lows
The bank’s analysis suggests that a severe El Niño scenario could reduce global cocoa production by a high-single-digit percentage.
Such an outcome would place additional pressure on already constrained inventories and could drive the global stock-to-grinding ratio down to approximately 23.8%.
That would fall below the previous record low of 26.5% reached in 2024, highlighting the potential for continued supply tightness across the cocoa market.
Mondelez Viewed as a Key Beneficiary
Against this backdrop, Wells Fargo identified Mondelez International (NASDAQ:MDLZ) as its preferred investment opportunity within the sector.
The bank estimates that Mondelez could benefit from a significant reduction in cocoa-related input costs in 2027, projecting a year-over-year decline of approximately 37% based on current forward market pricing.
Lower raw material costs could provide support for margins and profitability if cocoa prices evolve in line with market expectations.
More about Mondelez International
Mondelez International is one of the world’s largest snack food companies, with a portfolio that includes brands such as Oreo, Cadbury, Milka, Toblerone and Ritz. The company operates across more than 150 countries and is a major consumer of cocoa, making commodity price movements an important factor in its cost structure and earnings performance.