Monday November 2, 02:13 AM

Source: Indian Express Finance

Cocoa demand, prices go up on global shortage

By Rajesh Ravi
Shortage of cocoa in global markets is not only pushing its prices upwards, but also leading to a scramble for the commodity in the markets. The Indian crop is seen lower as a result of erratic rain in regions where the crop is cultivated. Disruption of the cocoa trade in Ivory Coast and shortfall in production in Nigeria and Ghana have led to the rally in cocoa prices globally. Cocoa rallied to its highest point in the US market since 1980 on a weaker dollar which encouraged buying across commodities, traders said. Meanwhile, according to the Kochi-based Directorate of Cashew and Cocoa Development (DACCD) estimates, India produces around 10,000-12,000 tonne of cocoa and imports some cocoa for its growing domestic market. Exports of Indian cocoa are mostly done by the organic and fair trade organizations that have fairly long-term contracts. Shiny George of Indian Organic Farmers Company feels that the crop would be lower in most regions. Procurement prices of cocoa are already high in India as buyers compete for it. Dry beans are fetching Rs 130-140 per kg while wet beans are selling at around Rs 38-45 per kg in Kerala, she said. Last year around the same time, dry cocoa beans fetched around Rs 80 per kg, while wet beans fetched Rs 25-33 per kg, she added. Some producing regions are reporting fungus disease in fruits due to heavy rains in the later part of the year, George said. The supply constraint could come as a breather for farmers as prices were easing due to lower demand from the chocolate industry. Exports of the commodity were also on the lower side as importers demanded less because of sharp drop in cocoa grindings owing to the economic crisis. Reports suggest that an El Nino is often associated with lower cocoa production, while a La Nina usually leads to higher output. The International Cocoa Organisation forecasts grinding for the last fiscal to be on the lower side. Inventory of major buyers is also on the lower side and reports of shorter supply could trigger fresh demand, a trader said. Demand for cocoa, however, is showing signs of picking up again. Losses in world cocoa demand measured by manufacturer grindings from major chocolate-producing countries are showing signs of bottoming out. Underlying demand from the growing middle class in India and China is another bullish factor in the cocoa market as world economy recovers, George said. Indian demand for cocoa is increasing at a healthy rate of 8% per annum. The Indian chocolate market is thought to be worth around Rs 15 billion and offers great potential for Western chocolate manufacturers as the market is still in its early stages. Chocolate consumption is on the rise in the country due to increasing prosperity coupled with a shift in food habits, pushing up India s cocoa imports. Reports said Indian cocoa requirement is growing at around 15% annually and expected to touch 30,000 tonne in the next five years. International chocolate manufacturing companies are also procuring increasing volumes from India as quality of Indian cocoa beans is considered better compared with others. According to DACCD, the Indian cocoa production is likely to cross 17,000 tonne in five years as more farmers turn to cocoa farming.