The International Cocoa Organization highlighted the
increasing grip of Africa on the global cocoa sector as it hiked its forecast
for the rise in world stocks of the bean, citing record production.
The ICCO lifted to 1.78m tonnes its forecast for world cocoa
inventories at the close of 2016-17, taking to 382,000 tonnes the rise expected
in stocks over the season.
The upgrade, from a previous estimate of a 264,000-tonne
rise in inventories over the season, which ends in September, reflected in the main
an increase in the global production estimate to 4.69m tonnes.
That figure, up 140,000 tonnes on the previous forecast, would
be an all-time high, besides representing a bounce of more than 700,000 tonnes
year on year.
The increase in production was in the main down to higher
expectations for output in the two key West African producers, Cote d'Ivoire
and Ghana, where harvest hopes have been buoyed by a rise in volumes of beans
delivered to ports.
ICCO world cocoa forecasts 2016-17, change on previous, and (year on year)
Production: 4.692m tonnes, +140,000 tonnes, (+720,000 tonnes)
Grindings: 4.263m tonnes, +21,000 tonnes, (+134,000 tonnes)
End-of-season stocks: 1.782m tonnes, +117,000 tonnes, (+382,000 tonnes)
Stocks-to-use ratio: 41.8%, +2.5 points, (+7.9 points)
For Ghana, the production estimate was hiked by 100,000
tonnes to 950,000 tonnes, with the ICCO flagging official reports that an outbreak
of army worm insect caterpillar pests had been quashed.
"Ghana Cocoa Board has ruled out any significant impact of
the army worm infestation on the output for cocoa… due to swift intervention measures
put in place to curb the infestation," the organisation said.
The Cote d'Ivoire output estimate was lifted by 80,000 tonnes
to 1.90m tonnes, although the ICCO flagged some potential for the midcrop
harvest, which started in April, to disappoint.
The organisation noted talk "that the prevailing weather
patterns - inadequate rainfall and hot weather conditions - in most of the
cocoa growing regions in Côte d'Ivoire could result in the midcrop tailing off
earlier than expected".
'Most dynamic country'
The upgrades lifted to 75% the proportion of world cocoa
production stemming from Africa this season, up 2 points year on year.
And this comes at a time when a shift to encourage grinding
in cocoa-growing countries, allowing them to capture more of the value of the
processing chain, is increasing their
importance on the consumption side of the balance sheet too.
"Origin grindings are forecast to increase in the current
cocoa season," rising by 109,000 tonnes year on year to 1.91m tonnes, the ICCO
"Côte d'Ivoire is expected to be the most dynamic country
engaging in processing activity with grindings projected at 550,000 tonnes."
By contrast, grindings in cocoa importing countries, such
the US and the European Union nations, are "projected to rise slightly", by 25,000
tonnes to 2.35m tonnes.
The growing reliance on the cocoa industry on Africa, while a
potential boost to the continent's wealth prospects, is viewed with unease by
A strong focus of production on one region is viewed with
concern for any crop, in raising the threat of weather upsets disrupting global
supplies, but with West Africa seen as possessing raised political threats too,
evident last month in military unrest in Côte d'Ivoire.
Cocoa futures for July fell in New York in early deals on Thursday, but a relatively modest 1.6% to $2,015 a tonne, giving back only part of their gains from earlier in the week.
"Cocoa prices had already fallen sharply," from Augst into early May, "in anticipation of a high supply surplus, with the result that the confirmation from the ICCO no longer weighed on prices," Commerzbank said.