Barclays Capital has countered waning expectations for a deficit in world cocoa production, citing indicators of firm demand besides production setbacks, most lately to plantations in flood-hit Nigeria.
Marex Spectron last week, while pegging the shortfall in world cocoa output in 2012-13 at 107,000 tonnes, cited the potential for a lower number, flagged that its estimate included a "very cautious view" of output from mid-crops in West Africa, the major producing region.
And on Wednesday, Cargill's managing director of cocoa and chocolate, Jos de Loor, forecast "more or less" a balanced supply of cocoa, citing the impact of rains in improving prospects for crops in West Africa.
However, Barclays Capital took a more gloomy view of output prospects, noting that rains in Nigeria had proved excessive, leaving the fourth-ranked producing country with its worst flooding in more than 40 years.
Indeed, the Cocoa Association of Nigeria has forecast a 20% drop to 200,000 tonnes in domestic output, well below the increase to 300,000 tonnes that had been hoped for earlier in the season.
In top producer Ivory Coast, arrivals of beans at ports had fallen to 236,000 tonnes so far in 2012-13 as of Sunday, a 19.5% decline on the same period last year, while in second-ranked Ghana, purchases by regulator Cocobod had tumbled 31% to 209,400 tonnes as of November 8.
Meanwhile, demand, while soft in the West, had proven strong from Cameroon so far, near-doubling to 12,000 tonnes, and Malaysian officials said the country's cocoa processing capacity may double to 360,000 tonnes next year to meet Asia's growing appetite.
"We expect less-than-favourable weather causing production setbacks in key producers, coupled with strong grindings data in key producers such as Cameroon and Malaysia, to widen the deficit," BarCap analyst Kate Tang said.
The bank lifted by 10,000 tonnes to 108,000 tonnes its forecast for the shortfall in 2012-13.
The comments come amid a tricky time for cocoa investors, juggling not just the variety of opinion of world supplies, but the changes in demand and grinding dynamics.
While processing is seen switching from Western countries closer to bean-producing countries, enabling grinders to exploit lower overheads and cut down on transport cuts, Ivory Coast was this week revealed to be ditching a tax break on cocoa products, so threatening a move in processing abroad.
"This is likely to make cocoa grinding in Ivory Coast less attractive," Commerzbank said.
"It seems questionable whether Ivory Coast will be able to meet its government's ambitious target to have half of domestic cocoa production ground in the country by 2015."
Meanwhile, prices of cocoa butter - one of the two main products, with powder, of grinding cocoa – have extended a recovery from levels this year at which they traded at levels close to parity with values of raw beans, the weakest ratio since at least the 1990s.
The ratio, which topped 3.0 in 2005, has recovered to some 1.7-1.8 times, reflecting weak inventories at a time when demand is being whetted by the prospect of Christmas, Valentine's Day and Easter, all periods of strong chocolate consumption in the West.
Cocoa butter is a key ingredient of quality chocolate, with powder used in the likes of biscuits, drinks and ice cream.
The cocoa powder ratio has dropped from levels close to 2.5 times the price of raw beans at the turn of the year to well below 2.0 times.