The world cocoa market faces a deficit for the first time in three years this season, the International Cocoa Organization said, flagging a drop in African output, and raising doubts over data showing a sharp drop in European grindings.

The ICCO, in its first forecasts for 2012-13, estimated consumption growth accelerating to 1.5% from less than 0.5% last season.

Demand growth will be boosted by an increasing Asian taste for chocolate products such as drinks and ice cream based on cocoa powder, and a reversal in a phase of running down inventories of cocoa butter - the other main product of bean processing, and the basis of chocolate bars.

"Cocoa butter stocks, which have been depleted in the last two years, need to be replenished, while the appetite for cocoa powder in Asia continues to grow," the organisation said.

"World grindings of cocoa beans are, therefore, estimated to fare better and rise by around 1.5% to hit the 4m-tonnes mark."

'Contraband flows falling'

However, production will fall, for a second successive season, this time by some 70,000 tonnes, thanks weaker output from Africa, the main producing region.

Output in Ivory Coast will fall by 16,000 tonnes, with Ghana's harvest seen falling by some 60,000 tonnes – although this could be a reflection of measures to tighten smuggling by farmers seeking to exploit the higher prices Ghana pays to farmers, of nearly $1,800 a tonne, than the $1,430 a tonne in its neighbouring country.

"Thanks to tighter measures taken by the two countries at the border, contraband flows have declined noticeably compared to previous years," the ICCO said.

Growing force

These declines will more than offset a 25,000-tonne rise expected in Indonesia, the third-ranked producing country, where efforts to increase cocoa bean output "through better farming techniques and using better seeds, fertilizer and disease controls" are bearing fruit.

Indonesia will become as bigger contributor to world grindings too, the ICCO said, noting that "exports of semi-finished products have overtaken exports of beans, following the imposition of an export tax on raw cocoa beans".

Indonesia has undertaken a similar levy policy on palm oil, in an effort to encourage domestic processing, and keep in-country the added value from turning the raw vegetable oil into refined products.

Data 'concerns'

Europe will see particular growth in grinding volumes, of more than 2%, rebounding from a rate of decline in the October-to-December period which, on European Cocoa Association estimates, reached 6%.

However, the ICCO highlighted "concerns" over the ECA data, following the withdrawal of an, unnamed, German processor from contributing to the statistics, "thereby affecting transparency" by reducing the statistics' grip on the market.

"Most analysts in the cocoa sector are of the view that the share of the ECA quarterly published figure, in relation to total processing activity in Western Europe, has been gradually declining," the organisation said.

Deficit estimates

The ICCO estimates showed a deficit of 45,000 tonnes in world output in 2012-13, sufficient to trim the stocks-to-use ratio, an important pricing metric, to 44.7%.

This shortfall is lower than figures of more than 100,000 tonnes earlier in the season from the likes of Marex Spectron and Barclays, but close to more recent projections, made since the recovery in West African deliveries to port.

Macquarie last month estimated the deficit at 71,000 tonnes, with Rabobank two weeks ago pegging the figure at 43,000 tonnes.