Bloomberg News

Cocoa Market Will Be Balanced in 2011-12, Goldman Sachs Says

October 04, 2011

(Updates with analyst comments starting in third paragraph.)

Oct. 4 (Bloomberg) -- Cocoa supplies will match demand in the current 2011-12 season as production drops in West Africa, the top global growing region, according to Goldman Sachs Group Inc.

Output exceeded demand by 325,000 metric tons in the 2010- 11 season that ended last month on record-high production in Ivory Coast and Ghana, data from the London-based International Cocoa Organization show. The countries are the world’s two biggest producers of the chocolate ingredient.

“A return to neutral weather conditions in West Africa suggests that 2011-12 production will not be as large as the current crop,” Goldman Sachs analyst Damien Courvalin wrote in a report today.

Cocoa prices will be at $2,700 a ton in 3, 6 and 12 months, the bank said, adding that a possible revival of La Nina weather conditions may benefit crops.

“The potential return of the La Nina weather pattern would be beneficial to West Africa production and present downside risk to our forecast,” Courvalin wrote.

La Nina conditions, a cooling of the Pacific Ocean that can cause severe climate fluctuations and affect rain patterns, will strengthen and persist into the Northern Hemisphere’s 2011-12 winter, the U.S. National Weather Service said last month.

Cocoa for December delivery slid 6 pounds, or 0.4 percent, to 1,681 pounds ($2,587) a ton by 9:31 a.m. on NYSE Liffe in London. Cocoa for December delivery fell $29, or 1.1 percent, to $2,546 a ton on ICE Futures U.S. in New York.

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net


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