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Prospects for cocoa prices in 2013

18 March 2013

According to reports by Agrimoney.com, 2012 saw increases in average cocoa prices for the first time in 3 years, with rises of 6% and 4% respectively on the New York and London markets. Setbacks related to weather and disease in West Africa, “which depressed estimates for production in 2012-13”, seem to have had a greater influence on price trends in 2012 than concerns over declining demand in western markets. Most analysts see these price increases continuing into 2013, but with variations on the overall price level in any given period. Barclays sees a steady increase, while Commerzbank sees prices rising only in the third quarter, and Rabobank anticipates a more variable progression in prices.

According to Barclays, the success of reforms in Côte d’Ivoire (see Agritrade article ‘ Cocoa moving ahead but challenges remain high’, 24 February 2013) “should lead to less volatile cocoa prices, encouraging farmers to increase investment in the sector by guaranteeing a stable income.” However, it expects “less-than-favourable weather causing production setbacks in key producers”, widening the market deficit to some 108,000 tonnes.

Similarly, Rabobank sees “demand growth outpacing production increases”, while analysts at Macquarie maintain that “the global market will be in a small deficit, as West African production falls and grindings recover”. Cargill, however, believes that output “will more or less match consumption”.

Cocoa: Analysts’ forecasts of average prices per quarter for 2013 (US$/tonne, New York front futures contract)

  Barclays Commerzbank Rabobank
Q1 2,650 2,500 2,500
Q2 2,670 2,500 2,450
Q3 2,700 2,550 2,550
Q4 2,710 2,600 2,550
Average for 2013 2,683 2,550 2,512.5

Editorial comment

With the exception of Europe, almost all fundamentals point towards higher cocoa prices in 2013. Europe’s fourth-quarter cocoa grindings dropped by 6.2% (to 327,982 tonnes) compared to 2011, returning a 10% decline in cocoa grindings for the whole of 2012. (For comparison, the decline was “only” 4% in the US). According to the German confectionery industry association BDSI, output of all types of chocolate product in Germany in 2012 declined by 1.1%, with exports (85% of which go to other EU countries) falling 0.9% year on year. This was compounded by rising raw material prices, which drove up prices, further discouraging demand.

However, chocolate makers will need to start replenishing cocoa bean stocks this year, as they have used up a large part of the cocoa butter stock built up over the previous year. This, added to improving demand for cocoa powder from Asia, should lead to more grindings of cocoa beans in 2013.

Cocoa grindings in Asia grew by 2.8% in the fourth quarter of 2012. According to a Reuters poll of 21 analysts and traders, global cocoa grindings should rise by 2–2.5% on restocking in the 2012/13 marketing year.

Developments in producing countries are likely to further support prices, with concerns over the volume and quality of production in Côte d’Ivoire following dry weather. According to exporters’ estimates, cocoa arrivals at Côte d’Ivoire ports (as at 3 February) totalled 854,000 tonnes, compared to 902,650 tonnes in the 2011/12 season. In addition, disputes over pricing policy between traders, exporters and the Coffee and Cocoa Council could further disrupt exports of Ivorian cocoa in the coming period. In Ghana, the world’s second biggest producer and exporter, purchases by Cocobod (the Ghanaian Cocoa Board) fell by 18.3% to 539,247 tonnes between the start of the season on 12 October and 17 January. This year’s harvest is projected at around 800,000 tonnes, down 5% from the last crop year.

Developments in West Africa have not been significantly offset by an 11% increase in production in Indonesia, the world’s third largest supplier, since local cocoa grindings in West Africa are set to increase, reducing the volume of beans available for export by an estimated 23%.

According to the International Cocoa Organisation, analysts estimate that the global cocoa market will be in deficit by anywhere between 25,000 and 150,000 tonnes, after the 90,000-tonne surplus in 2011/12.


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