By mid-2024, chocolate lovers were already feeling it. Sticker shock at the candy aisle. Shrinking bars at rising prices. And all of it traced back to a single culprit: cocoa.

Last year’s historic rally, driven by drought, disease, and panic-buying, pushed cocoa prices into uncharted territory. But as every seasoned trader knows, what spikes must eventually stabilize. And for cocoa, that moment may have arrived.

The warning signs were subtle at first. Slowing unit sales masked by price hikes. Candy companies are quietly pulling promotions. But the real tell came from the grinders—the companies responsible for transforming raw cocoa beans into chocolate liquor and butter for manufacturers. Their verdict? Demand was backing off. Cocoa grindings hit multi-year lows this year, signaling that the price elasticity of cocoa may have finally met its match.

A fresh grindings report due this week could confirm what insiders already suspect: the sugar high has worn off.

While demand retreats, Mother Nature is helping on the supply side. La Niña rains are boosting West African crops. Several scenarios could unfold: in the best case, continued good weather could increase supply and meet demand. In the base case, La Niña might persist with moderate impact, allowing steady supply growth. In the worst case, a return to dry conditions could sharply reduce harvest yields. With farmgate prices raised for a second time this year, more beans are moving through official channels and onto the exchange. Higher farmgate prices should lower the risk of smuggling. After last year’s supply shortages, this outlook presents a mix of outcomes worth watching.

Speculators have noticed. Managed money has flipped the script, swinging to its largest short position in over three years. Quite the reversal from the bullish fervor that defined 2024. When momentum traders run for the exits, they rarely look back.

Cocoa prices are expected to retreat in the near term, likely testing the mid-$5,000s per metric ton as inventories rebuild. Rather than collapse, prices appear to be normalizing after the recent spike.

By mid-2026, I see cocoa prices settling between $5,000 and $6,000 per ton. Well below 2024 peaks, yet higher than pre-rally levels. This marks a classic post-supply crunch reset and potentially a new normal for the market.

Key risks ahead: Europe’s deforestation laws, unpredictable weather, and potential tariff shifts cast uncertainty over 2026-2027.

And while consumers have shown they’re price-sensitive, it’s supply shocks—not buyers—that historically move cocoa markets. For now, the storm seems to be calming. But in this market, the next one is always forming just offshore.