Cocoa demand will comfortably outstrip supply this season, which could support prices at their current high level, industry players said.
Eric Bergman, of JSG Commodities, said the world will see a 100,000 tone deficit this season, as production falls by 150,000 tonnes to 4.05m tonnes.
That would be down from 2014-15 production of 4.2 million tonnes, when supply outstripped demand by 25,000 tonnes, accord to JSGs estimates. .
Mr Bergman forecast cocoa grinding, which is the volume of beans processed into cocoa and powder, and is a proxy for demand, to remain unchanged from last season.
Larger deficit
And Ryan Davies, head of cocoa futures trading at Ecom Agrotrade, sees an even larger deficit.
In an interview with Reuters, Mr Davies forecast a 183,000 tonne deficit this season.
Ecom forecasts the Ivory Coast main crop which runs between October and March, and yields export grade beans, at around 1.0m tonnes, down from 1.25m last year.
Ecom saw production rising in Ghana, the world’s second ranked grower, but not enough to stave off a defect.
Cushion from last season
Still, markets have had to adjust to the unexpected global surplus in the 2014-15 season.
The International Cocoa Organisation sees last season’s surplus at 36,000 tonnes.
“Theoretically, this should provide added cushion to the market for 2015-16 reducing the extent of a possible shortfall,” said veteran analyst Judith Ganes-Chase this week.
Harmatten threat
Despite a strong start to production in West Africa this season, where most of the world’s supply comes from, uncertainty remains over the prospects for the crop.
Output can be hard hit by the harmatten, a cold dry wind that blows across the region from the Sahara over the winter months.
Ms Ganes-Chase noted that the winds have already “blanketed” Ghana and the Ivory Coast, and “a strong harmattan could spell trouble for the crop if it soaks moisture from the ground and the dusty winds hurt the developing pods or even snap branches from the trees if severe enough”.
And the ongoing El Nino phenomenon can exacerbate dryness in West Africa.
“The conditions came just a point where wet weather had started to benefit the crops and alleviate concerns, especially in Ghana,” said Ms Ganes Chase.
Price support
The deficit would help support cocoa prices, which have risen this year despite a bearish market for other agricultural commodities.
Mr Bergman forecast prices of between $3,100 and $3,600 per tonne.
March cocoa futures are currently at $3,347 a tonne in New York, down from a 4-year high of $3,429 a tonne this month.
Mr Davies also said that prices could endure, saying that fundamentals justified a price of £2,300 a tonne, with March cocoa futures in London trading at £2,281 a tonne.
