The bank said in its August Agri Commodities report that it expects a 56,000 MT shortfall for 2015/16 (October 1 to September 20) and a 30,000 MT supply and demand deficit for the current crop year 2014/15.
“The weather in West Africa has been quite dry so far in August, not only increasing volatility, but forcing us to make a downward reduction in Ghana and Côte D’Ivoire.”
Rabobank had expected West African cocoa production to be at 900,000 MT for 2015/16, but it now forecasts 830,000 MT for the cocoa year. Ghana is the worst affected, but Côte D’Ivoire’s crop is also suffering from dry conditions, it said.
Prices near civil war levels
However, the bank believes cocoa prices will come down after October’s presidential elections in Côte D’Ivoire.
“The elections are likely to be peaceful, but we expect any event or exchange of words to have an exaggerated effect on the market, as the memory of the civil war and the short prohibition of cocoa exports in early 2011 still lingers in traders’ memories,” it said.
Rabobank expects prices on the ICE in New York to be between $3,120 and $2,800 for the next five quarters.
Cocoa prices during Côte D’Ivoire’s civil war in early 2011 stood at between $3,160 and $3,390, according to the International Cocoa Organization’s (ICCO’s) monthly averages of daily prices.
‘Cocoa demand will remain weak’
Global cocoa demand has been challenged so far in 2015. Second quarter cocoa grindings remained flat year-on-year in Europe and fell significantly in North America (-8.6%) and Asia (-12%).
“..While analysts are overall of the view that cocoa demand will remain weak, the declining stocks of semi-finished products provide some grounds for improving processing activities in the coming months,” said the ICCO in its latest monthly review.
Major chocolate players such as Mondelēz, Nestlé and Hershey all reported weak performance in confectionery for Q2 driven by rising commodity costs for cocoa and nuts and a slowdown in China’s economic growth.
Laurent Pipitone, director of the International Cocoa Organization’s (ICCO’s) economic division, told ConfectioneryNews last month that cocoa processors were struggling to break even as the combined cocoa butter/powder ratio stands at around 2.7, while the break even point is 2.8.