ICCO and Markets Agree: Cocoa Might be in Short Supply

The International Cocoa Organization (ICCO) cut its forecasted surplus for the next cocoa year from 100,000 to 25,000-50,000 tons. In an interview along the sidelines of the ICCO meeting in London, the ICCO’s chief, Jan Vingerhoets, pointed out that the economic recession may be ending sooner than expected, leading to higher demand. In addition, cocoa production for the next cocoa year starting on October 1 may well be lower than anticipated. The effects of El Niño on  Indonesia and Ecuador may lower production in these countries and the Côte d’Ivoire continues to struggle with pests and diseases.

International futures markets seem to agree with Mr. Vingerhoets’ assessment. Cocoa futures prices in London reached a 24-year high of £2,055.00 while New York prices reached $3183.00.

The graph to the left shows the record of annual surpluses and deficits for the past 49 years. The deficits over the past four years have made a serious dent in warehouse stocks. No wonder chocolate makers everywhere are eager to promote additional plantings and rehabilitation of cocoa groves around the world.

The immediate impact for chocolate lovers will be higher prices (see my post on Mars earlier this month). The manufacturers will of course hedge against such prices risks, but, according to the Financial Times, they refused to discuss that matter.

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