Olam Sees a Cocoa Shortfall

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 Olam Sees a Cocoa Shortfall

Cocoa supplies are on course for the third shortfall in a row, the longest run in about 50 years, Olam International Ltd has said. The company’s supplies account for about 10% of the world’s output of the beans.

Gerald Manley, the company’s managing director, said that the shortfall will propel prices by at least 10% up from now to the end of the year. Production will fall short of demand by 100,000 metric tons this season, according to Manley’s projections, or about 2.4% of production. Oslam has not revealed the possible deficit for 2014-15.

Prices of cocoa in London have already soared 13% in 2014 as deficits persisted, supported by a surging demand for chocolate on a global scale. A third shortage in a row would be the longest stretch in 47 years, data from the International Cocoa Organization in London showed.

According to Business Recorder, September delivery cocoa ascended $5 or 0.2% to exchange at $3,085 per ton on the ICE. The price was below the $3,103 hit on June 5, which nearly breached a three-year peak.

“Cocoa prices need to go higher to stimulate production as demand will keep rising. The price to the farmer can be a real problem because they have to compete with other crops. It has been a poor man’s crop,” Manley is quoted by Bloomberg as saying.

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Manley estimates that the demand for cocoa powder, a product used in the making of cookies and ice cream, will surge in Asia within the next 10 years to account for more than 75% of soaring growth in global consumption. Consumption of cocoa butter, which makes chocolate, has advanced 7% in the past 10 years in emerging markets, propelled by Asia, he added.

Manley forecasted continued processing of real chocolate products as well as powder-based products as earnings of middle-classes in China, Indonesia and India soar.

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To contact the reporter of this story; Jonathan Millet at john@forexminute.com