Ghana, the world's second largest cocoa producer, should harvest 500,000 tonnes in 2003/04 and may expand its crop rapidly over the next few years, Dutch bank ABN Amro said on Tuesday.
"We could be seeing in Ghana what we saw in Ivory Coast about 20 years ago when it was starting as a producer and each year it added 100,000 tonnes into their crop," Jean-Michel Boehm, head of the bank's Soft Commodities Business Development unit, said at a conference in London.
Other analysts have forecast Ghana's output at between 450,000 and 490,000 tonnes this season, compared with an estimated 497,000 tonne crop in 2002/03, the highest in at least 30 years.
A 500,000 tonne crop would be the highest in nearly 40 years.
"Ghana could reach 700,000 tonnes production in the next three years," Boehm said.
Boehm put Ivory Coast 2003/04 main crop (Oct-March) production at 1.15 million tonnes and expected a healthy mid-crop (April-Sept).
"We have no doubt at this stage that we are going to see a good mid-crop in Ivory Coast," he said, predicting a harvest of up to 300,000 tonnes.
He said world demand should hold firm, with high butter ratios indicating that cocoa consumption was recovering, but the market should remain in balance for the current season given the increase in supply.
Despite the potential bearish impact of large crops, the big fund short position in London and New York should support prices in the short term.
Boehm estimated the funds were short by a combined total of around 20,000 lots in the two markets.
"They are short in the nearby months and they should cover very soon, in the next two weeks. Prices in New York should hit $1,580 (per tonne).
"But it shouldn't last long. Prices in the mid term should slip back to current levels under origin pressure," he said, pointing to forward selling by producers of the 2004/05 crop.
CSCE May cocoa closed at $1,471 on Monday.
Boehm said political unrest in Ivory Coast was a key driver for prices in the longer term.