Brazil disease cuts hopes for world cocoa supplies

by Agrimoney.com

Disease and drought damage in Brazil prompted the International Cocoa Organization to raise its estimate for the world production deficit of the bean, although the impact was offset by concerns over demand in the important Asian market.

The ICCO, in a quarterly bulletin, raised by 15,000 tonnes to 60,000 tonnes its forecast for the shortfall in world cocoa production in 2012-13.

Separately, soft commodities traded Armajaro estimated the world cocoa deficit in 2012-13 at 50,000 tonnes.

The ICCO revision reflected in part a downgrade of 36,000 tonnes, to 3.97m tonnes, in the forecast for global output, as producers in the north east of Brazil grapple not just with presistent drought which has also affected other crops such as coffee but an outbreak of witches' broom disease too.

'Disease is back'

"The first forecasts of the temporão crop for Bahia and other states [is] not looking promising," the ICCO said.

"The witches' broom fungus - which was the cause of Brazil's fall from number two among world producers in the 1990s to number six - is back, raising concern over the potential for further increase in the Bahia region," the organisation said.

"Spells of drought earlier in the season are adding to the losses, which can be anything between 30% and 50% of the temporão crop."

The ICCO cut by 35,000 tonnes to 195,000 tonnes its estimate for Brazilian output – taking it well behind the more than 820,000 tonnes it would need to beat Ghana into second rank among producers in 2012-13.

Asian worries

However, the impact of Brazil's woes on the world coca balance sheet was offset in part by a reduced estimate for world demand, cut by 21,000 tonnes to 3.99m tonnes, down to "uncertainty of the global economic situation and poor processing margins".

In particular, "there are now some concerns that the economic situation may affect near-term demand in Asia, which in the past few years has been a flourishing market".

The Asian grind, which had been seen increasing by 23,000 tonnes over the season, was now seen increasing by 3,000 tonnes.

"Lower demand for powder than previously anticipated has led [Asian] grinders to cut output", the ICCO said.

Mature vs developing markets

This revision, which came as the IMF cut to 7.75% from 8.0% its estimate for China's economic growth this year, demoted Asia behind the Americas and Europe in terms of growth this season.

"It should be noted that consumption amongst the middle classes in the BRIC countries was seen as offsetting the negative growth of the mature markets," the ICCO added.

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