Cocoa demand will exceed supplies by 94,000 metric tons in the 2011-12 season started in October, reversing a previous forecast for a surplus of 32,000 tons, Marex Spectron Group said.
Global cocoa production will be 3.867 million tons, 70,000 tons lower than forecast in November, with smaller crops in West Africa, the London-based broker said in a report e-mailed today. Ivory Coast and Ghana are the biggest growers of cocoa, and they produce a larger so-called main crop and a smaller so-called mid crop. The mid-crop starts in April in both countries.
“Weather conditions during December and early January in Ivory Coast and Ghana were far more typical of a normal dry season and significantly less benign than the same period of last season, indicating that the mid-crops will be close to trend and much lower than last year,” Jonathan Parkman, the head of agriculture at Marex in London, wrote in the report.
The crop in Ivory Coast will be 1.335 million tons, down from 1.38 million tons previously forecast and 1.7 million tons in 2010-11, Marex said. Production in Ghana will be 845,000 tons, up from a previous estimate of 825,000 tons, Marex said. Ghana’s crop was 955,000 tons a year earlier, the broker said.
Global bean grindings, an indication of demand, will rise 3.3 percent to 3.922 million tons from the previous season, the brokerage said. The new estimate is up from 3.866 million tons forecast in November.
The so-called forward sales program started in Ivory Coast as part of wider industry reforms will have a “profound” effect on the cocoa market, with prices set to fall, Marex said.
The Ivorian government said in November it planned to sell 70 percent of the 2012-13 harvest before the season’s start as part of industry reforms that include a price guarantee to farmers that is 50 percent to 60 percent of international market prices. The program started Jan. 31.
“The trade will have to manage very carefully the increase in quantity of forward hedges that they will incur as a result of forward marketing by Ivory Coast,” Parkman wrote.