Cocoa rally pauses, but El Niño risk premium is brewing

⑴ London cocoa futures edged down 0.1% on Friday to £3,967 per ton, with the weekly chart set to record a 3.15% decline. After a string of recent rallies, momentum has temporarily weakened, but the overall upward trend remains intact.⑵ Dealers pointed out that given the substantial gains accumulated over the past few weeks, the current pullback is not unexpected. The market needs time to digest previous bullish factors; however, fundamental support is still ongoing.⑶ Institutional reports emphasize that the El Niño event tends to suppress rainfall and push up temperatures in the West African cocoa belt during critical pod-setting periods. Related risk premiums are expected to gradually accumulate in the second half of 2026, potentially posing a threat to supply prospects.⑷ New York cocoa contracts rose slightly to $5,306 per ton, diverging from the London market, reflecting differences in fundamentals and capital dynamics across delivery regions.⑸ In coffee, Arabica futures were up 0.6% to $3.112 per pound, though the weekly chart will still see a drop exceeding 5%, mainly due to accelerated harvest progress in Brazil's largest producing region, increasing short-term supply pressure. However, news of Brazil’s coffee exports to the United States receiving tariff exemptions provided some positive sentiment to the market.⑹ Raw sugar prices edged down 0.3% to 14.65 cents per pound, with weekly losses around 1.2%. EU sugar production prospects have weakened due to severe drought in France, Germany, and Poland, and planting acreage has shrunk sharply amid sluggish sugar prices. Nonetheless, the market continues to digest the interplay between supply contraction and weak demand.