Cocoa prices should pick up a little in 2018, even though a surplus is being forecast by the International Cocoa Organization and traders.
In its latest report on soft commodities, Commerzbank Research noted that although cocoa is trading much lower than it was a year ago, the price should soon have bottomed out. “In the 2017/18 season, which is about to start, we are not necessarily likely to see another increase in production,” said Commerzbank.
“Initial estimates for Cote d’Ivoire are cautious – the Ivorian Coffee and Cocoa Council expects 1.73-1.75 million tons in 2017/18, but also warns that incentives persist to smuggle significant amounts into neighbouring Ghana given that prices in Ghana are higher for political reasons.”
Even so, market participants seem to be preparing for a further surplus in the 2017/18 season. A Bloomberg survey among coffee traders and processors revealed that a surplus of almost 100,000 tons is expected on average, despite the expectation of a smaller crop in West Africa and further rising demand.
The ICCO believes a further surplus is possible, even several in succession, although it is still too early for projections, with the next mid-crop still a long way off. “We forecast a cocoa price of US$1,950/ton in the fourth quarter of 2017 and expect a moderate recovery of cocoa prices in 2018,” Commerzbank concluded.