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Cocoa officials quash talk of deficit upgrade

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As cocoa industry officials stamped on one rumour bullish for cocoa, another one emerged, leading to ideas that futures may prove, relatively, resilient when futures markets open on Wednesday.

The International Cocoa Organization said, as markets closed on Tuesday, that speculation that it was about to hike to 310,000 tonnes, from 160,000 tonnes, its estimate for the world production deficit in 2012-13 - rumour which sent prices soaring - was down to "possible misinterpretation".

While an annual ICCO survey of cocoa inventories held in warehouses had shown them falling 310,000 tonnes to 1.51m tonnes over the marketing year, which ends in September, a meeting of export advisors on Friday concluded that this figure "had underestimated world stocks".

"Consequently the cocoa supply deficit for the 2012-13 season was lower than the 310,000 tonnes identified by the survey," the organisation said, confirming that it, "so far", stood by its previous estimate for the shortfall of 160,000 tonnes.

'Invisible stocks'

The expert panel said that the decline in the stocks figure could have down to factors including an increase in so-called "invisible" stocks, held at locations not reporting to the ICCO survey.

Furthermore, cocoa beans in transit may have been "higher than estimated".

"The ICCO regrets that the confidentiality of the working documents sent to the [expert panel] ahead of the meeting was not adhered to and led to possible misinterpretation of the information by some market players, which may have had an impact on futures prices on January 23 in particular," the organisation said.

Another rumour…

However, one market source spoke to after the statement questioned whether it would prompt a hefty reversal in futures, which in New York closed above $2,900 a tonne on Tuesday for the first time for a spot contract since September 2011.

"I would see it if anything as neutral to bearish, following last week," when ideas of the shortfall meant that cocoa futures charts "changed completely overnight".

Furthermore, there are fresh bullish market rumours, that West African producing countries, the world's top cocoa growers "will revise their arrivals numbers", downwards, implying that the start to 2013-14 for supplies is not as strong as has been thought.

"That now is also supporting the market."

'Must be viewed with caution'

Earlier on Tuesday, Commerzbank questioned the significance of data showing that West Africa's main cocoa crop had been "more positive than had been envisaged", saying that the "high year-on-year increase of 30% to date in Ivory Coast must be viewed with caution".

The bank said: "For one thing, the figures are only estimates, and for another the basis for comparison is low because the shipments in the previous season got off to only a slow start."

There is also some idea that, with the panel meeting on Friday, and an ICCO statement initially due on Monday, has been told, some in the market may already have got wind of the announcement.

Cocoa for March closed in New York 0.6% higher at $2,905 a tonne – up 8.4% in a week - having set a two-year high of $2,933 a tonne earlier.

London cocoa for March settled up 0.2% at £1,833 a tonne, up 6.8% week on week, having earlier touched £1,853 a tonne, also the highest for a spot contract since September 2011.


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