A larger than expected supply of cocoa beans from West Africa will add to high buffer stocks and push cocoa prices down by 4%, according to financial service provider Rabobank.
In its recently published report ‘Outlook 2012—Down, But Not Out’ Rabobank has forecast that cocoa prices will fall from $2,400 (1,790) per tonne in quarter four 2011 to $2,300 in the same quarter in 2012, a drop of 4%.
“Abundant supply of cocoa beans and better expectations for the 2011/12 crops are expected to lead prices lower in 2012,”said the report.
Its estimates go contrary to recent forecasts from Goldman Sachs, which said prices would rise 12% to $2,700 per tonne in the next three months.
High demand for cocoa powder
According to Rabobank, weak economic growth in 2012 is expected to lead to flat demand for chocolate confectionery. However, confectioners could be protected from price fluctuations due to high demand for cocoa powder products, it said.
Rabobank has anticipated grinds in the EU and US to be lower than 2011 levels, although global grinds are expected to be up 3.7% due to demand for cocoa powder products such as ice cream and health supplements.
Politics in Ivory Coast
The report said that policy changes by the new government in the Ivory Coast could impact cocoa trade.
According to Rabobank, the government has already guaranteed farmers a coca price of between 50% and 60% of the international terminal price, but this is expect to have a token impact of prices.
The new government has also touted a policy whereby exporters must pre-purchase beans before the harvest begins to guarantee the farmer’s price.
“The uncertainty about the government’s plans is impacting the market, and since the country accounts for one-third of global output, unpredictable government interventions will inject volatility into the international terminal markets,” said the report.