Asian chocolate lovers take a big bite of global cocoa glut

Bloomberg

Chocolate lovers in Asia are taking a big bite out of the global cocoa glut.
From India to China, where demand is growing faster than in major markets like Europe or the US, consumers are eating more chocolate. At the same time, big growers in West Africa are harvesting smaller crops. Top processors Cargill Inc. and Barry Callebaut AG expect those trends to erode a glut that made cocoa one of the worst-performing commodities the past year.
“The crop probably will not be as strong as last year, and you’ll see growth in demand,” Harold Poelma, president of Cargill’s cocoa and chocolate unit, said in an interview in Singapore. “These two things together make for a modest surplus, which is the expectation that we have now.”
Cocoa prices plunged 34 percent last year and are down again in 2017 after big harvests in Ivory Coast and Ghana overwhelmed demand. Production in the two countries—which account for two thirds of global supply—is now set to fall, as is the harvest in Indonesia, Asia’s top producer. Citigroup Inc. forecasts the surplus will shrink to as little as 50,000 metric tons in 2017-18 from almost 500,000 tons a year earlier.
Since touching a nine-year low in April, cocoa on ICE Futures US in New York is up 19 percent to $2,084 a tonne. While hedge funds have been betting all year that prices would keep dropping, they have reduced their net bearish holdings for three straight weeks to the lowest since early August.
To be sure, any rally may be limited because there is still too much cocoa left over from last year’s harvests, though the glut is shrinking, Citigroup said in a report. The bank sees prices at $2,005 this year and $2,150 in 2018. “World cocoa-bean prices are likely to remain depressed
in 2018 amid forecasts of
another year of oversupply and increased inventories due to favourable weather,” Bloomberg Intelligence analysts Diana Gomes and Duncan Fox wrote in a report.