El Niño is forming again, and the cocoa market is the first to price it in

On 14 May 2026, NOAA's Climate Prediction Center issued an El Niño Watch, putting the probability of El Niño emerging in May-July 2026 at 82%, and the chance of conditions persisting through December 2026-February 2027 at 96%. The weekly Niño-3.4 sea surface temperature anomaly stood at +0.4°C in mid-May and has been rising since then. Subsurface temperatures in the equatorial Pacific have warmed for six consecutive months.

For commodity markets, the implications are showing up first in cocoa. NY cocoa futures hit a 3.5-month high of $4,709 per tonne on 11 May before pulling back to around $3,800 by 22 May. The bid is straightforward. Warmer, drier conditions in West Africa during the 2026/27 main crop establishment phase, which begins in October, could damage the harvest just as the previous season's surplus is being delivered into the market.

The ENSO setup right now

Three signals point to El Niño formation.

The subsurface Pacific is warming consistently

The CPC's equatorial subsurface temperature index has risen for six consecutive months, with widespread above-average temperatures across the equatorial Pacific. The eastern-basin Niño 1+2 index is already at +1.0°C, well above the El Niño threshold for that region.

Atmospheric coupling is starting

Westerly wind anomalies are now observed at low levels over the western equatorial Pacific and at upper levels over the central and east-central Pacific. Convection is suppressed around Indonesia, consistent with a transition out of the long La Niña phase that ended earlier in 2026.

Model agreement is high

The North American Multi-Model Ensemble (NMME) and NOAA's CFSv2 both forecast El Niño formation within the next month, with the event persisting through Northern Hemisphere winter 2026-27.

Strength is the open question. The boreal spring predictability barrier limits forecast skill for events forming in this window. CPC's strength forecast shows no category (weak, moderate, strong, very strong) exceeding a 37% probability. A 2024 analysis of two decades of IRI ENSO forecasts (Ehsan et al.) found that dynamical models predict warm-event onsets several months in advance with reasonable skill, but tend to under-predict event amplitude at longer leads. The current setup, with strong subsurface warming, is the kind of signal dynamical models pick up well. How much the atmosphere couples with it by autumn is what will determine whether this turns out to be moderate or strong.

Why did cocoa move first

Three things converged on cocoa over the past month.

The supply trigger came from early surveys of the 2026/27 West African cocoa crop, which showed below-average cherelle formation on cocoa trees. Cherelle development in May-June feeds into the main October harvest. On 29 April 2026, agricultural broker StoneX cut its 2026/27 global cocoa surplus estimate from 267,000 metric tonnes (the January forecast) to 149,000 metric tonnes, citing El Niño-related risks to West African production. The 2025/26 surplus was also revised down, from 287,000 to 247,000 tonnes.

The demand picture is mixed. Q1 2026 European cocoa grindings fell 7.8% year-on-year to 325,895 tonnes, the weakest first quarter in 17 years. North American grindings fell 3.8% to 106,087 tonnes over the same period. Asian grindings rose. Chocolate sales in North America fell 1.3% in the 13 weeks to 22 March 2026. Hershey and Mondelez reported steadier-than-expected consumer demand in their Q1 earnings, but the multi-quarter trend is consumer pushback after two years of high retail prices.

The political-economy backdrop is unique to this market. After cocoa peaked at nearly $12,000 per tonne in December 2024, the Ivory Coast set the 2025/26 main-crop farmgate price at a record CFA 2,800/kg in October 2025. By March 2026, with global prices falling and roughly 100,000 tonnes of unsold beans piling up, the Ivorian government cut the mid-crop farmgate price to CFA 1,200/kg (about $2.13), a 57% reduction announced on 4 March. The state allocated CFA 280 billion (about $496 million) to clear the main-crop backlog at the original guaranteed price.

The net effect is that cocoa is trading on two timelines at once. The 2025/26 surplus is being delivered into the market. The 2026/27 crop is being priced for El Niño risk. The volatility, which hit a 3.5-month high in mid-May, reflects that split.

The Strait of Hormuz disruption is also indirectly feeding into cocoa prices. Closure has raised global shipping rates, insurance costs, and fertilizer prices. Cocoa is a heavy fertilizer user, and West African producers are exposed to the same input cost shock that prompted the EU Fertilizer Action Plan adopted on 19 May 2026.

Which other commodities are most exposed

ENSO's commodity impact is uneven across crops and regions. The historical pattern, simplified:

West Africa: Tends to be dry and warm during El Niño. Affects cocoa (Ivory Coast, Ghana, Nigeria, Cameroon) and, to a lesser extent, palm oil. Nigerian cocoa output for 2025/26 was already projected to fall 11% year-on-year to 305,000 tonnes by the country's own cocoa association, before any El Niño impact.

Southeast Asia: Tends to dry during El Niño, with a lag of 3-9 months. Affects palm oil (Malaysia, Indonesia, the world's two largest producers), rubber, and coffee. Indonesian palm oil exports have historically declined 6-12 months after major El Niño events as drought-stressed trees produce fewer fresh fruit bunches.

Australia: Tends to dry, particularly in eastern wheat regions. The 2015/16 El Niño was associated with reduced Australian wheat output.

Southern Africa: Tends to be dry. Affects maize and soy in Zambia, Zimbabwe, and South Africa.

Southern South America: Tends wetter during El Niño. Often supports Argentina's soybean and corn yields, although the relationship varies year to year.

Mediterranean: ENSO is only a weak driver. The North Atlantic Oscillation, Atlantic SST patterns, and other regional modes have a larger effect on Mediterranean winter rainfall than the ENSO phase. El Niño years have produced mixed outcomes in Iberia and no consistent signal for Greece or the eastern Mediterranean.

For Greek and Mediterranean farms, the climate risk story for 2026-27 is dominated by other factors: ongoing drought trends, summer heat extremes, and water scarcity. Those pressures are well documented in the EU's most recent climate adaptation study, which found that climate change is the most significant structural challenge for the sector and that southern Greece is among the regions facing the most pronounced aridification. The seasonal weather outlooks for Europe remain a better guide for Mediterranean conditions than the ENSO outlook.

What it means for buyers and growers

For chocolate and confectionery importers, the next six months pivot on three things.

The 2026/27 main crop

West African rainfall in the August-October window is the key test. If rainfall is below normal during pod development, cocoa will bid sharply. Forward cover for Q4 2026 deliveries at current levels is defensible if El Niño develops with West African drought; less attractive if the season turns out wetter than feared and the 2025/26 surplus continues to overhang.

Grinding momentum

If Q2 grindings remain soft, especially in Europe, the supply-side bid will be partially offset. The current grinding decline reflects high retail prices passing through to consumers, not just weak commodity demand. Watch for whether Hershey and Mondelez ease price points to defend volume.

Ivory Coast's next farmgate decision

With the mid-crop price already cut to CFA 1,200/kg, the next signal will be the October pricing for the 2026/27 main crop. A higher main-crop price relative to international futures could create an incentive to sell more through official channels and reduce smuggling losses to Ghana, which has been paying premiums.

For growers in West African cocoa regions, the financial squeeze is acute. The CFA 1,200/kg mid-crop price barely covers production costs at current input prices. Farmers absorbed the CFA 2,800 to CFA 1,200 cut on mid-crop deliveries because the alternative was no sale at all.

What to watch next

Three updates will move the trade in the coming weeks.

The next NOAA CPC ENSO Diagnostic Discussion is scheduled for 11 June 2026. It will update the May-July probability and provide greater confidence in strength categorization.

The IRI plume will update alongside it. The February 2026 plume put El Niño probability at 58% for May-July 2026, below NOAA's 82%. That gap should narrow as the spring predictability barrier lifts and forecast skill improves through June.

West African rainfall data for July and August will tell the market whether the early cherelle signal is being borne out in the field. If main-crop pod development is constrained, the cocoa bid intensifies. If rains arrive on schedule, the El Niño premium fades, and the 2025/26 surplus story dominates again.

For farms and traders outside the immediate ENSO impact zones, the broader signal is that the climate-driven volatility cycle in soft commodities is starting another lap. The lesson from the 2023-24 cocoa cycle, which saw prices spike to nearly $12,000 per tonne and then collapse, is that ENSO-linked supply shocks now interact with structural fragility in producing regions (aging trees, depleted soils, low farmgate prices in past years) to amplify swings. Buyers building cover and growers building resilience will both need to plan for that.