Growing political crisis in Ivory Coast should send cocoa prices higher as the West African nation produces nearly 40% of the world's raw cocoa, Rabobank warned in its latest Agri Commodity market report.
Rabobank predicts that in 2011, the global cocoa market is going to be balanced between much better supply available due to plentiful rainfall in West Africa, and an ambiguous political situation in Ivory Coast.
According to press reports, the price of cocoa rose in New York and London as some companies evacuated workers after Ivory Coast s presidential election sparked violence.
With the political outlook uncertain, farmers in Ivory Coast have been less willing to take the financial risk and put in the effort required to grow more cocoa, which means the country's productive capacity has gone into gradual decline.
Although the conflict in the West African region is predicted to increase the cost of cocoa, the bank said that a good supply in Ghana and only lackluster demand growth expected in the US and the EU will be bearish for prices in 2011.
Global grindings are forecast to rise 2.5 per cent in 2010/11 to 3.60m tonnes, but are still below the highpoint of 3.75m reached in 2007/08.
The slow rebound in growth after the financial crisis is a function of confectioners using substitutes such as palm oil and reducing product sizes to support margins, said Rabobank.
Rabobank analysts said this trend is likely to continue, lowering demand growth for cocoa and supporting downward momentum in 2011.
Cocoa prices have dropped 30 per cent on the London exchange since mid July, while the New York market is 13 per cent lower in the period, making cocoa the worst performing agricultural commodity in CY 2010.
The futures market rallied through 2009 on lower output in West Africa but began falling in late January 2010, reported Rabobank.
Prices are still considerably higher than the low hit before the rally, said the analysts, London values are 43 per cent up from the 2008 low, and 17 per cent higher than the five year average.
Rabobank said that demand for cocoa is expected to rise 3 per cent in 2010/11, after an increase of 4 per cent in 2009/10 and a fall of 7 per cent in 2008/09 when use hit a five year low of 3.5m tonnes.
But intriguingly, the general view among analysts seems to be that the latest escalation of political tension will not make matters much worse than they already are.
That is partly because of the nature of cocoa production. Ivory Coast's crop is produced by thousands of independent small farmers.
Rabobank predicts that in 2011, the global cocoa market is going to be balanced between much better supply available due to plentiful rainfall in West Africa, and an ambiguous political situation in Ivory Coast.
According to press reports, the price of cocoa rose in New York and London as some companies evacuated workers after Ivory Coast s presidential election sparked violence.
With the political outlook uncertain, farmers in Ivory Coast have been less willing to take the financial risk and put in the effort required to grow more cocoa, which means the country's productive capacity has gone into gradual decline.
Although the conflict in the West African region is predicted to increase the cost of cocoa, the bank said that a good supply in Ghana and only lackluster demand growth expected in the US and the EU will be bearish for prices in 2011.
Global grindings are forecast to rise 2.5 per cent in 2010/11 to 3.60m tonnes, but are still below the highpoint of 3.75m reached in 2007/08.
The slow rebound in growth after the financial crisis is a function of confectioners using substitutes such as palm oil and reducing product sizes to support margins, said Rabobank.
Rabobank analysts said this trend is likely to continue, lowering demand growth for cocoa and supporting downward momentum in 2011.
Cocoa prices have dropped 30 per cent on the London exchange since mid July, while the New York market is 13 per cent lower in the period, making cocoa the worst performing agricultural commodity in CY 2010.
The futures market rallied through 2009 on lower output in West Africa but began falling in late January 2010, reported Rabobank.
Prices are still considerably higher than the low hit before the rally, said the analysts, London values are 43 per cent up from the 2008 low, and 17 per cent higher than the five year average.
Rabobank said that demand for cocoa is expected to rise 3 per cent in 2010/11, after an increase of 4 per cent in 2009/10 and a fall of 7 per cent in 2008/09 when use hit a five year low of 3.5m tonnes.
But intriguingly, the general view among analysts seems to be that the latest escalation of political tension will not make matters much worse than they already are.
That is partly because of the nature of cocoa production. Ivory Coast's crop is produced by thousands of independent small farmers.
