Strong demand for cocoa is likely to widen the deficit in the global market in 2013/14 from the year before and help keep prices up around two-year highs, major commodities trader Olam International Ltd said on Wednesday. Prices of cocoa beans have surged some 20 percent in the past four months, hitting a two-year high of $2,765 a tonne earlier this week. While world consumption continues to grow, spearheaded by Asia, output is not expected to keep pace.
Amit Suri, Olam's chief operating officer for cocoa, pegged the 2013/14 global deficit at 185,000 tonnes, compared with the previous year's 150,000 tonne deficit. "The real story for 2013/14 is we are seeing a deficit that is consumption-led," Suri said. "If you look a how the market has behaved in the last six to nine months, it's actually consumption which shone through."
Olam expects global consumption growth of 2.75 percent in 2013/14, compared with 3 percent the previous year. This is above the long-term average of around 2.5 percent. Suri said prices could rise in the next two to four months to around $3,000 a tonne on a second-month basis, although there could be a correction downward in the shorter term as some funds take their profits amid a huge long position in the market. "Sustainability initiatives have arrested the decline in crop production over the years, but it's not enough to have sustainably met the requirement from the demand side," Suri said. In top grower Ivory Coast, Olam expects output of 1.5 million tonnes, in line with the previous year.
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