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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.

Interested in trading cocoa? Learn more about cocoa markets and commodities trading.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Vanya Dragomanovich

Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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