Bloomberg News

Cocoa Grindings to Continue to Recover, Goldman Sachs Says

February 22, 2012

(Updates with grindings data in second paragraph.)

Feb. 22 (Bloomberg) -- Global cocoa processing will continue to recover, supported by demand from emerging markets, according to Goldman Sachs Group Inc.

Cocoa grindings, an indication of demand, fell 6.6 percent in 2008-09 as the global recession dented demand for the beans, data from the London-based International Cocoa Organization show. Processing then recovered, rising 5.7 percent in 2009-10 and 4.1 percent in 2010-11, according to the ICCO.

Singapore-based raw materials trader Olam International Ltd. estimates cocoa processing grew by about 5 percent last year, “slightly higher than what people have factored in,” Sunny Verghese, the chief executive officer, said on a conference call about the company’s earnings on Feb. 14. Grindings have been “very strong, stronger than expected,” he said.

“We expect a close-to-balanced global cocoa market in 2011-2012,” Damien Courvalin, an analyst at Goldman Sachs in New York, wrote in a report e-mailed today. “We expect decent supply prospects from West Africa.”

Cocoa has climbed 12 percent in London and 16 percent in New York this year on speculation dry weather caused by the harmattan winds from the desert would damage the crop. Prices fell 32 percent in London and 31 percent in New York last year.

“We view the recent rally in prices as a correction to the excessive price decline at the end of 2011 and we reiterate our 3- to 12-month forecasts of $2,450 a ton,” Courvalin said.

Coffee, Sugar

A supply response in 2012-13 to recent high coffee prices probably will generate a surplus under average weather conditions, according to the report. Coffee climbed to a 14-year high of $3.089 a pound in New York on May 3 last year.

Sugar output in Brazil’s Center-South, the country’s main producing area, will remain “key” to prices this year, according to Goldman Sachs. Production of the sweetener there fell for the first time in six years last year, according to industry group Unica.

“While we expect a recovery in production, our 3- to 12- month sugar price forecasts remain at 22 cents a pound until we see signs of a large production recovery in Brazil for the upcoming 2012-13 season,” according to the report.

Harvesting of the 2012-13 sugar cane crop in Brazil usually starts in April.

--Editor: John Deane

To contact the reporter on this story: Isis Almeida in London at

To contact the editor responsible for this story: Claudia Carpenter at

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