Cocoa production may exceed demand for the current 2010-11 season by more than 350,000 metric tons, with crops in the Ivory Coast and Ghana at record highs, according to Singapore-based Olam International Ltd.
The Ivory Coast, the world’s largest grower, may produce about 1.6 million tons in the current season, Gerry Manley, director and global head for cocoa, said in an interview in London today. The crop in Ghana, the second-largest grower, will be about 900,000 tons, Manley estimated.
“Most of the surplus will come from West Africa and is largely unsold,” he said. “Cocoa is currently overvalued.”
Cocoa for September delivery climbed $88, or 2.9 percent, to $3,111 a ton by 12:31 p.m. on ICE Futures U.S. in New York, and earlier today traded at $3,125, the highest since May 11. Prices are up 4.2 percent from a year earlier.
Olam moves about 500,000 tons of cocoa a year, Manley said. The global crop will be 4.025 million tons in 2010-11, the London-based International Cocoa Organization said this month.
The crop in Indonesia, the third-largest producer, will be slightly above 500,000 tons in the current season, Manley said. The country produced 550,000 tons in 2009-10, the ICCO estimates. The cocoa season usually starts Oct. 1.
The Ivory Coast will have shipped more than 180,000 tons by tomorrow since the end of a 4 1/2-month political crisis in the country, with a “significant portion” heading to the U.S., Manley said.
The premium for Indonesian cocoa is “very strong and buyers will look to source from alternative origins, and that’s likely to be West Africa,” Manley said.