Chocolate Prices to Fall as Cocoa Surplus Seen at Six-Year High

(Bloomberg) -- Chocolate prices are set to fall as the world cocoa market shifts from a deficit to the largest surplus in six years, according to the International Cocoa Organization.

Global production will top demand by 264,000 metric tons in the 2016-17 season, which started Oct. 1, the London-based group said Tuesday in a report. The deficit was 196,000 tons in the preceding year.

World output is seen rising almost 15 percent to 4.55 million tons in the current season, with gains in Ivory Coast, the top grower, as well as in Ghana, Indonesia and Ecuador. In contrast, worldwide grinding of cocoa beans -- a measure of demand -- will advance 2.9 percent to 4.24 million tons, the group said.

The shift in the supply and demand dynamics of the cocoa market has weighed on prices in the past 12 months. Cocoa futures have slumped about 35 percent in New York over the period. If that decline is sustained in the months ahead, prices for finished cocoa and chocolate products are expected to drop, thereby supporting consumption, the group said.

"It may take time for the reduction in the cost of the cocoa beans to be passed on to consumers," the organization said in the report.

• Ivory Coast is forecast to collect 1.9 million tons in the current crop year, up 20 percent from a year earlier.
• Ghana's crop is seen at 850,000 tons; Indonesia's crop will rise slightly to 330,000 tons; Ecuador's will rebound to 270,000 tons; Nigeria's will rise 15 percent to 230,000 tons; and Cameroon's will increase to 250,000 tons.
• “The outlook for processing activity during the current season seems more favorable than during the two previous seasons,” the ICCO said.
• Grinding will increase in producing countries but stagnate in Europe and the Americas.

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Richter