World cocoa supplies are even tighter than had been thought, thanks to a reluctance among farmers to raise production above ever-greater prospects for consumption, Fortis Bank Nederland has said.

The bank raised by 12,000 tonnes, to 136,000 tonnes, its estimate for the deficit in cocoa production in 2009-10.

And it ripped up forecasts for a return to a surplus in 2010-11, saying that the consumption would continue outstrip, albeit by a modest 3,000 tonnes, leaving the market on track for its fourth deficit in five years.

Furthermore, it warned over longer-term supplies, noting that prices which hit a 33-year high, for a spot contract, of �2,410 a tonne in London earlier this month appeared to have failed to excite growers.

'Stagnant output'

"It's becoming increasingly evident that there has as yet not been a significant farmer response to better returns, except in pockets where the cocoa industry is already doing well, such as Ghana," the bank said.

"The ageing nature of the vast majority of [Ivory Coast] trees, plus the extremely low level of fertiliser application, is beginning to manifest itself in the form of stagnant output," the bank said.

"The better weather so far this year may be able to arrest the decline, but it cannot by itself reverse that decline. That will take much greater investment levels."

Sweet tooth

The bank's forecast revisions reflected greater hopes for cocoa grindings, boosted by consumers' resilient taste for chocolate.

"It's now fairly widely accepted that the collapse in grindings reflected de-stocking by manufacturers rather than any belt-tightening by chocolate consumers," Fortis Bank Nederland said.

Global grinding would hit 3.70m tonnes in 2010-11, 7,000 tonnes from a 2007-08 high.

Cocoa climbed 1.4% to �2,279 a tonne in London, for July delivery, as of 13:45 GMT, with New York's July lot  up 1.0% at $2,866 a tonne.

"Both markets look to be rangebound with a slight upward bias, the week looking to finish positively", if tentatively so, Stephanie Garner at Sucden Financial said.