The global cocoa market is expected to end up only in a marginal surplus this year despite previous expectations of a large overhang as demand proved stronger than expected and the crop year produced less than anticipated.
“Despite the significantly lower surplus, the cocoa price shed 3% yesterday and closed trading at a two and a half-month low of $2,454/t,” said Commerzbank, adding that the traders were “buying the rumour, selling the fact”.
This morning London cocoa was down 2.64% at 1,773.
The International Cocoa Organization (ICCO) has comprehensively revised its assessment of the global cocoa market and cocoa prices and now predicts a surplus of 10,000 tonnes of the precious beans instead of the 105,000t as previously expected.
Cocoa production in Ghana in particular is expected to be significantly down on last year but overall, insufficient rainfall and ageing trees in the main cocoa growing areas will see total output dwindle by 3.3% less on the year. The ICCO now expects that cocoa-growing countries will produce 50,000 tonnes less than previously expected to a total of 4.59 million tonnes but that global grinding would be 40,000 tonnes higher at 4.53 million tonnes.
What is more, the fact that cocoa prices were previously low for a sustained period encouraged cultivation of other agricultural commodities in cocoa-producing countries such as cashew and rubber, as well as illegal mining.
The ICCO envisages robust demand in Asia and increased grinding in the West African cocoa producer countries.