The executive director of the International Cocoa Organization (ICCO) indicated on Monday that the 2008/09 cocoa season will yield less cocoa than previously thought. Despite a predicted decline in demand as a result of the global economic crisis, Jan Vingerhoets told Reuters that he expects a shortfall of about 45,000 tonnes.
It seems that the economic mess has not yet halted demand for chocolate. Fourth quarter grindings in Europe and the U.S. were up compared to last year albeit by small amounts, 0.1 percent and 1.85 percent respectively.
But before we go and worry about not getting our chocolate fix, let’s put these numbers in perspective. The shortfall in the 2006/07 cocoa year amounted to 299,000 tons and last year’s shortfall amounted to about 55,000 tons. It is true that continued annual shortfalls will eventually result in cocoa shortages but we are anywhere near such a point.
In April of last year, the ICCO released an assessment of global supply and demand of cocoa. The assessment concluded that for the ten year period ending in 2007/08, supply and demand were rather balanced–five years of surpluses and five years of deficits. As the results, cocoa stocks–the amount of cocoa in storage from previous years–in 2007/08 were the same as ten years earlier, 1.5 million tons.
The stocks-to-grindings ratio (total stocks from previous years/total grindings) hovered between 45 and 55 percent for that period. It dipped below that reaching about 41% in the last cocoa year, but it is not clear if that represents a new trend.
All these numbers say only one thing: there’s enough cocoa in the world. A shortfall of 45,000 tons barely makes a dent in the stockpile of 1.5 million tons that is stored in warehouses around the world.
But it does mean good news for cocoa farmers. Plotting the stocks-to-grindings ratio against cocoa prices, the ICCO found that there is an inverse relationship between the two–a lower ratio means higher prices. Enough cocoa to go around and higher prices for farmers–hey, that’s win-win.
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