Bloomberg News

Credit Suisse Cuts Cocoa Price Forecasts on Overvaluation

October 27, 2011

(Updates with analyst’s comment in third paragraph.)

Oct. 27 (Bloomberg) -- Credit Suisse AG reduced its three- and 12-month cocoa price forecasts as the commodity is still “expensive” and the technical picture “looks weak.”

Cocoa will be at $2,550 a metric ton on ICE Futures U.S. in New York in three months, down from a previous estimate of $2,700 a ton, the bank said in a monthly report e-mailed today. The chocolate ingredient’s price is seen at $2,350 a ton in 12 months, down from $2,400 a ton forecast last month, it said.

“A dip below the $2,570 mark, a level that has so far proved to be a strong support level for the market, could trigger a downgrade in the technical trend,” analysts led by Tobias Merath wrote in the report.

“Given exceptionally positive weather conditions during the 2010-2011 crop year, the cocoa market is entering the new crop season with sizable carryout stocks,” according to the report. “The global cocoa market should remain sufficiently supplied.”

Arabica coffee “is the most overvalued commodity market under our coverage,” the bank said. Slowing economic growth could result in falling demand, especially in Europe, and therefore a higher surplus than initially anticipated, it said.

“Global coffee production is likely to come in fairly high, driven by solid production in Brazil and Colombia,” it said.

Arabica coffee is expected to be $2.30 a pound in three months, up from $2.20 last month, the bank said. It maintained its 12-month forecast at $2 a pound.

Raw sugar prices are unlikely to fall below 23 cents a pound, which is the amount mills need to continue producing the sweetener instead of ethanol, Credit Suisse said. Sugar cane is the raw material for both commodities.

Floods in Thailand, the second-largest sugar exporter, are unlikely to result in “substantive supply delays,” the bank said.

Credit Suisse raised its three- and 12-month sugar forecast to 27 cents a pound from 26 cents a pound last month.

--Editors: Sharon Lindores, 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 at ccarpenter2@bloomberg.net


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