Africa weather prompts cocoa supply fears

WEST AFRICAUnseasonal weather in West Africa, which produces almost three-quarters of global cocoa supplies, is threatening to widen the supply shortage for the commodity.

Cocoa is one of the few commodities that have risen this year, gaining 13 per cent in the year to date.

The commodity, which is currently trading around £2,200 a tonne, has been supported by West African supply concerns and the potential impact of El Nino, the weather phenomenon which tends to bring dryness to the region.

“What we’ve seen this year is abnormal rainfall patterns,” said Euan Mann of consultancy Complete Commodity Solutions at a conference organised by the International Cocoa Organization (ICCO).

Analysts are expecting a supply shortfall of about 100,000 tonnes for this cocoa season of 2015-16.

In 2014-16, supply and demand were balanced, said Laurent Pipitone, director of economics at the ICCO.

However, some forecasts are as wide as a supply deficit of 250,000 tonnes.

Jonathan Parkman, co-head of agriculture at commodity brokers Marex Spectron, is expecting a supply shortfall of about 100,000 tonnes but said he saw a “risk to the upside” due to the extended dry period in West Africa.

According to the ICCO, 72 per cent of the world’s cocoa is produced in Africa.

Demand for cocoa, which fell about 2.5-3.5 per cent in 2014-15 due to the economic turmoil in emerging markets and sluggish consumption in developed countries, is expected to rebound by about 2 per cent in the current year, said Mr Pipitone.

Edward George, head of group research at Ecobank, forecast production in West Africa to fall 3.4 per cent in 2015-16 to 2.8m tonnes, as production in Ivory Coast is expected to fall after a bumper crop the previous year.

Output from the country, the world’s largest producer, is expected to fall about 100,000 tonnes to 1.65m tonnes, he said.

Production in neighbouring Ghana is forecast to rebound after failing to meet expectations in 2014 – 15.

Late application of fertiliser and unseasonal rains coupled with extreme dryness has been blamed for the fall in this season’s crop to about 720,000 tonnes against the 900,000 tonnes initially pledged by the second-largest producer.

While some cocoa traders and industry executives are worried that Ghana’s problems are structural, where cocoa farms are being bought up by gold miners, Mr Mann said that the eight to 10 cocoa pod counting teams he speaks to regularly have not seen a decline in the number of farms they regularly visit.

http://businessdayonline.com/2015/09/africa-weather-prompts-cocoa-supply-fears/

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