LONDON (Reuters) - Cocoa prices should rise by the end of the year, recovering some ground after two consecutive annual declines, with a smaller global surplus expected in the 2017/18 season, a Reuters survey of nine traders and analysts showed.
New York cocoa futures are seen ending 2018 at $2,200 a tonne, up 8 percent from Monday’s close and 16 percent above the price at the end of last year, according to the survey’s median forecast.
Cocoa prices fell in 2016 and 2017 as the global market shifted into surplus driven by rising production in West Africa and sluggish demand.
London cocoa futures were projected to end 2018 at 1,550 pounds per tonne, up 6 percent from Monday’s close and 11 percent higher than the end of last year.
The survey produced a median forecast for the global cocoa surplus in 2017/18 of 100,000 tonnes, the same result as a Reuters poll in late July.
The International Cocoa Organization (ICCO) has estimated there was a surplus of 335,000 tonnes in the 2016/17 season.
Participants said the eventual size of this year’s surplus could hinge on when rains return to West Africa. The region is in its annual dry season, which runs from around mid-November until March.
A prolonged period of low prices has also begun to boost demand, with Europe’s cocoa grind in the fourth quarter of 2017 rising by 4.4 percent year-on-year.
One participant said the market’s outlook would depend partly on the extent to which chocolate sales volumes rise to back up the strong grind growth.
The survey produced a median forecast for this season’s crop in top grower Ivory Coast of 1.95 million tonnes, down from the ICCO’s estimate of last year’s production of 2.02 million.
The crop in number-two producer Ghana was seen at 870,000 tonnes in 2017/18, down from the ICCO’s estimate for the prior season of 970,000 tonnes.
Ghana’s cocoa purchases fell between October and mid-January compared to last season and it may miss its full-season output target because of dry weather, senior regulatory sources said earlier this month.
Reporting by Nigel Hunt; Editing by Dale Hudson