Confectioners need to whet consumers' appetite for chocolate if cocoa prices are to overcome the "poor" prospects which have already driven them to 9-year lows, Marex Spectron said, foreseeing a record world output surplus of the bean.
"The short-term outlook for cocoa prices is pretty poor," said Jonathan Parkman, co-head of agriculture brokerage at Marex, citing the prospect that world production will exceed consumption by 400,000 tonnes in 2016-17.
"That would be the biggest ever in nominal terms," Mr Parkman said, adding that it would drive the ratio of world cocoa inventories to the annual grind rising to 47%.
With large supplies tending to depress values, the stocks-to-grind ratio "is going in the wrong direction, if you are hoping for a lively market", he said.
In the 2017-18 season, which starts in October, "there is also likely to be another surplus", Mr Parkman said, if stopping short of putting a figure on the production excess.
Forecasts for world cocoa output surplus, 2016-17
Marex Spectron: 400,000 tonnes
ICCO: 264,000 tonnes
Barry Callebaut: "around" 200,000 tonnes
New York cocoa futures for May on March 2 touched $1,881 a tonne, the lowest for a spot contract since October 2008.
"If we do not have weather issues, we are likely to break through these prices and trend lower."
The comments follow a warning last month from the International Cocoa Organization, which estimates the world cocoa production surplus in 2016-17 at a more modest 264,000 tonnes, that the world faces a structural excess in output over supply.
"Our fear is that the world cocoa sector has entered a period of structural surplus that is likely to last for some time to come," Jean-Marc Anga, ICCO executive director, said last month.
He added: "I don't really see the logic of continuing to increase production when we see the effects this has on countries.
"I think they are all aware of the need to have a more rational approach to their production policies."
However, Mr Parkman stressed the market could be brought back into balance "not necessarily though farmers growing less, but people eating more" cocoa products.
"Manufacturers need to get behind promoting chocolate again," and spur demand growth which had been lacking in particular in Western markets, where the product has had a "rough ride" for its high content of sugar, which is under attack from many dieticians.
The world chocolate confectionery market shrank by 2.1% in the August-to-January period, according to data from analysis group Nielsen, as reported on Wednesday by industry giant Barry Callebaut.
The decline was particularly marked in North America, where volumes dropped by 3.4%, contrasting with 1.6% growth in Asian sales, according to Nielsen.
Indeed, emerging markets, where sugar's reputation is not so tarnished, are particularly important for cocoa demand prospects, Mr Parkman added.
In fact, there was hope that chocolate makers would raise their game, thanks to improvement in grinding margins which have gone from the "weakest levels we have seen for some time to quite respectable one".
With profitability prospects improved it is more likely "confectioners will get out there and promote".
The so-called "combined ratio" - which compares the value of the processing products, cocoa butter and powder, with the cost of raw beans – last month reached a three-year high of 3.5, according to giant Barry Callebaut.
Barry Callebaut on Wednesday forecast the world cocoa output surplus this season at about 200,000 tonnes.
By Mike Verdin