Price differentials in Europe's cash cocoa market inched up this week as activity picked up ahead of the start of West Africa's main crop season in October, traders said on Friday. Ivory Coast differentials were about 65 pounds ($103.7) over London nearby cocoa futures contracts, up five pounds from last week.
Ghana differentials were 130 pounds over London nearby futures compared to 110. "There is some fund selling going on," one trader said. "This is the bottom of differentials, and I expect them to go up or at least to remain stable in the near future." World cocoa output rose 15 percent this year, thanks to favourable weather conditions in growing regions in Western Africa. A world cocoa surplus of 325,000 tonnes is expected in 2010/11, the International Cocoa Organisation (ICCO) said in its quarterly bulletin. The market is expected to be in deficit in 2012.
"We are still waiting to hear the news about main crop quality and depending on that we will know how big the deficit could be," another trader said. "But we can say now that due to the (economic) crisis, consumption will not rise as we had expected." European cocoa stocks have been slowly drawn down this year as top producer Ivory Coast's exports were halted for more than three months due to political conflict, forcing cocoa consumers to rely on other origins and existing stocks outside of the country. Valid cocoa stocks in NYSE Liffe's nominated warehouses as of September 5 fell to 84,740 tonnes from 103,040 tonnes on August 22, exchange data showed.