Wells Fargo Highlights Cocoa Supply Risks and Names Mondelez as Top Pick (MDLZ)

Recent Cocoa Price Recovery Draws Attention

Wells Fargo believes cocoa prices could remain supported by constrained inventories, even after the commodity retreated sharply from the extraordinary highs recorded over the past two years.

The bank noted that cocoa has recently regained momentum after falling from the record levels reached during the supply crisis. Prices had traded near $2,000-$3,000 per metric ton for years before surging to almost $13,000 per metric ton in early 2024.

While prices later eased back toward $3,000 per metric ton during late 2025, the market has shown signs of strengthening again in recent weeks.

Weather Conditions Could Tighten Supply Further

A major focus of Wells Fargo’s outlook is the potential return of El Niño.

NOAA currently estimates an 80% likelihood that the weather pattern will emerge this year. Historically, El Niño has been associated with weaker cocoa harvests due to hotter and drier conditions in producing regions.

Last week, Barry Callebaut said it is “watching the potential effect of El Niño,” while still forecasting a cocoa surplus for the current year.

Previous El Niño episodes coincided with meaningful disruptions to cocoa production, including during 2016 and 2024.

Stock Levels Could Reach New Lows

Wells Fargo estimates that a severe El Niño event could reduce worldwide cocoa output by a high-single-digit percentage.

Should that occur, global stock-to-grinding ratios could fall to roughly 23.8%, according to the bank’s calculations.

That would represent a new record low and fall below the previous trough of 26.5% recorded in 2024, reinforcing concerns about supply availability.

Mondelez Positioned to Benefit

Among consumer companies exposed to cocoa markets, Wells Fargo continues to favour Mondelez International (NASDAQ:MDLZ).

The bank forecasts that Mondelez’s cocoa costs could decline by approximately 37% in 2027 compared with the previous year, based on prevailing futures market curves.

If realised, those lower input costs could help strengthen profitability and provide a meaningful boost to margins.

More about Mondelez International

Mondelez International is a global snacks manufacturer with leading brands across chocolate, biscuits, gum and confectionery. Its portfolio includes Oreo, Cadbury, Toblerone, Milka and Ritz, making cocoa prices a key variable in the company’s long-term cost structure and earnings outlook.