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
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."
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.
Crops in the key producing countries of Ivory Coast and
Ghana got off to a weak start, following a dry spell in the third quarter of
2012, although deliveries to ports have recovered in recent weeks.
ICCO cocoa forecasts, 2013-14 and (year-on-year change)
Production: 4.00m tonnes, (-1.8%)
Grindings: 4.01m tonnes, (+1.5%)
Surplus: 45,000 tonnes, (+86,000 tonnes last season)
Carryout stocks: 1.79m tonnes, (-2.4%)
Stocks-to-use ratio: 44.7%, (-1.9 points)
Source: ICCO. Deficit estimate makes adjustment for bean weight loss
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.
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.
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
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.