Wells Fargo released a market note on the global cocoa complex, concluding that constrained inventories could keep price support in place even as recent volatility plays out.
The bank observed that cocoa futures have recovered off recent troughs in the past weeks. After a long period when prices hovered near $2,000-$3,000 per metric ton, cocoa experienced a sharp upswing in early 2024 that pushed values to almost $13,000 per metric ton. Prices then stayed at elevated levels for several years before retreating to roughly $3,000 per metric ton starting in fall 2025. In the most recent weeks, the bank says prices have moved higher again.
Wells Fargo underscored the possible role of El Niño in shaping production and inventories. The note cites NOAA's estimate that there is about an 80% probability of El Niño developing this year. The bank noted the historical tendency for El Niño events to weigh on cocoa output, and referenced comments from Barry Callebaut, the world's largest bean grinder and processor, which said last week it is "watching the potential effect of El Niño" even though the company still expects a cocoa surplus this year.
El Niño episodes can bring higher temperatures and drought to principal producing regions, the bank noted, and have been associated with steep production drops in previous episodes, including 2016 and 2024. Based on its scenario analysis, Wells Fargo said a severe El Niño could reduce global cocoa production by a high single-digit percentage in a worst-case outcome.
Such a production hit, the bank calculated, would materially tighten the relationship between available stocks and grinding demand. In that scenario global stock-to-grinding ratios could fall to an all-time low of 23.8%, compared with the prior record low of 26.5% recorded in 2024.
On corporate exposure to the cocoa complex, the firm expressed a preference for Mondelez International (NASDAQ:MDLZ). Wells Fargo estimated that, based on forward curves, Mondelez's cocoa input costs in 2027 could fall about 37% year-over-year, a dynamic the bank views as supportive for the company's cost structure if realized.
Wells Fargo's update highlights the interplay between weather risk, inventory levels and corporate input costs across the cocoa supply chain. The bank's scenario work points to the potential for tighter fundamentals should El Niño materially disrupt production, while industry commentary from processors is signaling a watchful approach despite an expectation of surplus for the current year.