ICCO cuts estimate for world cocoa output deficit

The deficit in world cocoa output will not prove as large has had been thought, thanks to benign weather in Ivory Coast, the International Cocoa Organization said, although it raised its estimate of the shortfall last season.

The organisation cut by 40,000 tonnes to 75,000 tonnes its estimate of the global cocoa production shortfall in 2013-14, which ends in September.

The revision reflected an upgrade by 58,000 tonnes to 4.16m tonnes in world output, down largely to improved hopes for West Africa, which is responsible for some 70% of world output.

This revision was only in part offset by an increase of 21,000 tonnes to 4.20m tonnes in the estimate for cocoa grindings this season.

Inventory impact

However, cocoa futures in New York, which were still trading when the data were released, showed little reaction, settling at $3,071 a tonne for July delivery, a gain of 0.8% on the day and roughly where they were before the data were released.

The ICCO data fell within the range of market estimates, which Marex Spectron pegged at - an albeit wide gap of - between a 100,000-tonne deficit and a 100,000-tonne surplus.

Many analysts have becoming significantly more upbeat over prospects for Ivory Coast production, the world's biggest, in particular, which the ICCO upgraded by 55,000 tonnes to a record 1.61m tonnes.

Furthermore, the ICCO cut its estimate for production in 2012-13, meaning that inventories heading into this season were smaller than had been thought.

The overall impact of the revisions was that the estimate for world stocks at the close of 2013-14 was upgraded by a modest 18,000 bags to 1.57m bags.

'Conducive conditions'

The production upgrade for 2013-14 reflected largely the weakness of the dry, seasonal harmattan winds between December and March, curtailing their negative effect on West African output.

"The adequate rainfall interspersed with sunshine in April this year, have been conducive conditions for a strong midcrop" too, the ICCO said.

In Ivory Coast, the mid-crop, which started last month, "has begun well, benefiting from favourable weather conditions", with the Conseil du Café-Cacao regulator set up two years ago also seen as boosting production.

"The reforms implemented for the country's cocoa sector by the Conseil du Café-Cacao are reaping positive results," the ICCO said, flagging the maintenance of the minimum cocoa price at 750 CFA francs ($1.55) per kilogramme for the mid-crop.

'Size and weight have improved'

The estimate for Nigerian output was upgraded too, by 10,000 tonnes to 230,000 tonnes, with farmers achieving success in controlling an outbreak of the black pod disease fungus.

"Reports of substantial rainfall have supported the development of the mid-crop, and as a result, the size and weight of the midcrop beans being traded have improved," the organisation said.

Revisions in Africa were behind the upgrade in the grindings estimate too, with the forecast for processing in the continent lifted by 16,000 tonnes to 813,000 tonnes.

Ivory Coast cocoa grinding capacity is expected to increase 7% to 505,000 tonnes this season, thanks to extra grinding capacity developed by the likes of Singapore-based Olam International.

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