A recent poll by Reuters showed that cocoa futures will fall 6% by the end of the year, weakened by the prospect of rising production in Cote d’Ivoire and Ghana.
Although, prices should still post an annual gain following a sharp rise this month.
The prices in London were seen ending 2020 at 1,850 pounds a tonne, down 6% from Wednesday’s close, according to the median forecast of survey participants, but still 4% higher than the market close at the end of last year.
Respondents expected there would be a more balanced market in 2020/21, with a median forecast of a marginal deficit of 5,000 tonnes compared with a more significant shortfall of 70,000 tonnes in 2019/20.
They noted the decision by Cote d’Ivoire and Ghana to charge a Living Income Differential (LID) effective the 2020/21 season could weigh on the future price.
The world’s top two producers announced in July 2019 that 2020/21 purchases must include the LID, a $400 premium to the futures price, in a bid to tackle pervasive farmer poverty.
The raised funs will be used to help increase payments to farmers.
“There will be continued volatility in the futures market influenced by the LID in Cote d’Ivoire and Ghana,” one respondent said, and added that higher farmer prices could boost production.
Cote d’Ivoire cocoa production in 2020/21 was seen rising to 2.25 million tonnes from a median forecast of 2.20 million in the current season, while Ghana’s 2020/21 crop was projected at 905,000 tonnes, up from 875,000 tonnes.
Cocoa prices in New York were also seen falling from current levels while still posting an annual gain, with an end-year projection of $2,600 a tonne, down 5% from Wednesday’s close but up 2% from a year earlier.
