<<Print>>

The International Cocoa Organisation (ICCO) has forecast a global cocoa deficit of 71,000 tonnes this season (2011/12) following last season�s 347,000-tonne surplus, owing to the return of poor weather in the main African producing countries, says an Ecobank research report. World production is now forecast at 3.96m tones -- 8% lower than the revised outturn for 2010/11, while cocoa grindings are expected to rise by 2% to 3.99m tonnes. In sub-Saharan Africa production is set to fall by 384,000 tonnes to 2.8m tonnes, of which 1.35m tonnes will come from C�te d�Ivoire (down from 1.51m tonnes last season) and 970,000 tonnes from Ghana (down from 1.025m tonnes). With global consumption growing strongly, the ICCO expects prices to be supported throughout the year although in the short-term ample global supplies and a stock-to-use ratio of nearly 50% should keep a lid on any price increase. Outlook for C�te d�Ivoire�s mid-crop remains unclear. The outlook for C�te d�Ivoire�s mid-crop (April-September) remains unclear, with conflicting views on whether it will match last year�s record outturn of 472,000 tonnes. Concerns were raised by the dry spell across the main growing regions that started in November, owing to an unusually strong Harmattan that caused a tailing-off in the main crop and which is likely to delay the start of the mid-crop until May. With fears growing that supplies from the world�s largest producer will dry-up, international prices have risen nearly 13% since the start of the year, reversing their steady decline since last April. However, the crop damage caused by the dry weather could be lower than feared after the main growing regions received 10-15mm of rain in late February. According to data from the Bourse du Caf�-Cacao (BCC), cocoa arrivals at the country�s second-largest cocoa port, San Pedro, reached 449,341 tonnes by February 19th -- up 19.8% year on year, indicating a surge in supplies in the final weeks of the main crop. However, it is not clear if this sharply higher trend has been matched by Abidjan port, through which half of the country�s cocoa exports pass. Given the prospect for a better-than-expected mid-crop, which the ICCO expects to come in at 350,000 tonnes, Ecobank expects C�te d�Ivoire to produce 1.39m tones in 2011/12 -- 9% lower than last season but still one of the highest outturns over the past decade. Main traders end boycott of C�te d�Ivoire�s forward cocoa auction The main cocoa buyers and traders in C�te d�Ivoire, comprising the International Trader Group and Gepex, an organisation of cocoa processors and exporters including Olam, Nestl� and Cargill, have agreed to participate in forward sales of the 2012/13 crop. The daily auctions were introduced at the end of January but most buyers boycotted them, complaining of a lack of transparency and safeguards. One of the main concerns relates to the payment of contracts at the start of the 2012/13 season, when buyers of futures must either be reimbursed or pay the difference between their futures contract price and the reference price for the season (which is averaged from all the contracts sold over the preceding months). In order to mitigate this risk, the government has set up a special fund to manage the forward sales programme that will be funded by a tax on cocoa exports, and it hopes to build this up to US$80m by the start of the 2012/13 season. The ministry of agriculture has also set up a special committee to oversee the reform process and respond to stakeholder concerns. However, there are still financial and operational issues that traders, exporters and cocoa processors need to resolve with the government and the new regulator of the sector, Conseil du Caf�-Cacao (CCC): the most thorny concerns the schedule of costs which traders complain does not take into account the cost of delivering beans from different parts of the interior to the auction house. It is too early to say if the reform effort will achieve its overall goal of ensuring that farmers receive 50-60% of the international CIF cocoa price for their beans. But Ecobank anticipates more short positions on the futures market as traders and exporters seek to hedge the cocoa they have purchased from the forward auction. Global cocoa prices continued to fluctuate throughout February, driven by speculation over the impact that dwindling supplies from C�te d�Ivoire and Ghana�s main crops would have on the global market. After slipping at the start of the month prices rose to over US$2,450/tonne mid-month before moderating to US$2,383/tonne at the end of the month 12.7% up since the start of the year. With improving global demand and lower output from West Africa�s main and mid-crops, cocoa prices are likely to remain strong in the weeks ahead. However, recent good rains across West Africa could result in a better-than-anticipated harvest, driving prices below US$2,000/tonne by the middle of the year.