Commerzbank Research says it expects a cocoa price in New York of US$2,600/tonne in Q4 2018, a little lower than its recent highs.
In a report on agricultural commodities, Commerzbank noted that the cocoa price had soared by 50 per cent since the beginning of 2018, to US$2,750/tonne, having collapsed in the second half of 2016 and traded at between US$1,800 and US$2,200 per tonne in 2017.
According to International Cocoa Organization (ICCO), the global cocoa market should record another surplus of 105,000 tonnes in 2017/18. This is smaller than the last surplus, however, as global cocoa production is expected to fall by 2.3 per cent to 4.64 million tonnes and global demand for cocoa is expected to increase by 2 per cent to 4.49 million tonnes.
Production in all major producing countries is expected to drop in 2017/18, albeit only marginally in the world’s largest producing country – the ICCO estimates that Côte d’Ivoire will produce 2 million tons of cocoa in 2017/18, which is only 1 per cent less than last year’s record crop.
Commerzbank said unofficial data shows a marginal deficit for the season so far after good weather conditions. The ICCO expects Ghana to produce 900,000 tons, which is 7.2 per cent less than in the previous year.
“Not everyone is as optimistic as the ICCO,” said the bank. “Ecobank for example expects only 1.9 million tons Côte d’Ivoire and less than 800,000 tons for Ghana. ICCO is also much more optimistic regarding Indonesia, the third largest producing country, where it expects a decline in output of 3.4 per cent.
“Other observers anticipate a fall in the region of 6-8 per cent. In February there were reports in fact from Côte d’Ivoire that exporters were experiencing difficulties obtaining enough cocoa from producers to meet obligations towards customers as deliveries had fallen short of the previous year’s levels due to disease and poor weather conditions.
“The uncertainty is still high,” said Commerzbank. “After dry conditions in Côte d’Ivoire for a long time now – according to agency reports, the Coffee and Cocoa Council (CCC) in the country was expecting a 23 per cent decline in the mid-crop harvest in March – there has been heavy rainfall in many areas in the last few weeks.”
As Commerzbank also noted, demand is strong and, according to the European Cocoa Association 358,400 thousand tons of cocoa were processed in Europe in the first quarter, which was 5.5 per cent more than in the previous year and an all-time record for first three months of a year.
Asian processing figures have surprised on the upside, with 190,244 tons of cocoa processed there in the first quarter, an increase of 7.2 per cent in the previous year. In contrast, processing figures for North America were disappointing, falling 1.1 per cent year-on-year to 118,778 tons.
“Robust demand overall and disappointing news on the production side could reduce the surplus expected by the ICCO in 2017/18,” the ban said. “Some observers actually expect a small deficit. Whether this outlook justifies the huge rise of the cocoa price by almost 50 per cent so far this year is questionable however, as this price increase should have a dampening effect on demand.”