Investing.com -- Wells Fargo issued an update on the global cocoa market on Wednesday, noting that cocoa inventories may remain low and prices could stay supported.

The firm observed that cocoa prices have bounced off recent lows in recent weeks. After years of stability around $2,000-3,000 per metric ton, cocoa prices surged in early 2024, reaching nearly $13,000 per metric ton. Prices remained elevated for several years before falling back to around $3,000 per metric ton beginning in fall 2025. Recent weeks have seen prices move higher.

Wells Fargo highlighted the potential impact of El Niño on cocoa production. According to NOAA, there is approximately an 80% chance of El Niño occurring this year. Historically, El Niño has weighed on cocoa production. Barry Callebaut, the world's largest bean grinder and processor, stated last week that it is "watching the potential effect of El Niño," though the company still expects a cocoa surplus this year.

El Niño events can bring heat and drought to key producing regions and have been correlated with major production declines in 2016 and 2024.

Wells Fargo's analysis suggests that in a worst case El Niño scenario, global production could decline by a high single-digit percentage. Such an outcome could push global stock-to-grinding ratios to all-time lows of 23.8%, compared to the all-time low of 26.5% in 2024.

The firm expressed a preference for Mondelez International (NASDAQ: MDLZ), estimating that the company's cocoa costs in 2027 could decline 37% year-over-year based on forward curves.