Smaller cocoa production in Ghana shakes market

Lack of rains and the late application of pesticides and fungicides to protect the feet of cocoa have provoked a significant fall in production in Ghana, raising the risk that the producers did not have conditions to fulfill their contracts with buyers.
But the cocoa plantations of the African country should recover in the next harvest, say some analysts, now that the Government has returned to provide seedlings and pesticides directly to farmers, reverting changes he promoted himself to reduce a $ 400 million program of grants to cocoa.
Unstable production underscores the great vulnerability of future product markets, that move $ 7 billion: the excessive reliance of Côte d'Ivoire and Ghana, which together account for more than half of the world's cocoa supply. Last year, prices reached the highest level in three and a half years when the worst epidemic of ebola registered until today hit West Africa, spreading fears of a fall in cocoa production. The disease just not reaching or the Ivory Coast or Ghana, and prices retreated almost 21% in a period of four months.
The current problems of Ghana pushed cocoa prices back to maximum recorded during the ebola crisis, which will probably lead to a rise in the price of chocolate for consumers around the world.
Last year, the high cocoa made large chocolate producers such as Hershey co., Nestle SA and Lindt & Sprüngli AG, helped push retail prices up 8% this year. Analysts say that since retail prices go up, they remain at the new level same as the cacao back to fall.
Ghana must produce 696 thousand tons of cocoa beans this year, according to the International Cocoa Organisation (ICCO). The initial estimates were for an increase in production to about 1 million tons, compared with 900 Fmil in 2014, according to the Cocobod, government agency in charge of purchasing of cocoa.
The smaller harvest amplified doubts about compliance with the contracts of sale of Ghana, which the Cocobod closed based on initial forecasts. The Cocobod offered 850 thousand tons of cocoa for sale. The entity was unavailable for comment.
"There are people somewhere in the world waiting for 200 thousand tons of cocoa, some of them insisting that they are from Ghana," says Damien Want, cocoa operator of Sucden in Paris. "They have a product line that tells you that the cocoa is Ghana and cannot put Ivory Coast there [in the package]."
Cocoa prices are rising as the processors contend for the limited stock of Ghana beans available on the market. The cocoa contract for delivery in September, closed at $ 3,281 per tonne yesterday at the United States Futures Exchange, ICE Futures US, with a high of 12.75 percent in the year accrued. During the ebola crisis, cocoa futures reached $ 3,371 ton in September 24, 2014, the highest quote since March 2011.
"The production deficit is pushing everyone in the industry," says an Executive of the commercial area of West African Mills processing co., based in Ghana. "We're not operating with our ideal capacity because there is no supply of cocoa, or lower quality beans."
According to the Executive, some processors and exporters may not recover easily from loss because few predicted the fall after years of continuous growth of production. The West African Mills is a joint venture between the Cocobod and Hosta Group, Germany.
Changes in the subsidy program are partly responsible for the fall in cocoa production in Ghana this year. In an attempt to reduce costs, the Government of Ghana began a gradual reduction in the distribution of cocoa seedlings and pesticides directly to almost a million producers. Instead, producers agreed to pay a higher price for cocoa and let you buy the equipment and services they needed. But two years of low prices have led farmers to pocket the extra money from the Government, rather than invest it in the plantations.
When the Government found that this was happening, returned to deliver the chemicals directly. But this was too late for the development of the crop, according to a spokesman for the Association of producers of cocoa, coffee and shea nuts from Ghana.
Although the production of Ghana is decreasing, the demand remains high. The ICCO recently reviewed their data and predicts that consumption will exceed production in 38 thousand tonnes of cocoa beans this year, up from a previous forecast of a deficit of 17 million tons.
"We believe [more] price increases will come, mainly due to problems in the provision or expectation of trouble against a backdrop of rising global demand, especially from Asian emerging markets," says Matt Forester, Chief Investment Officer of the New Square Capital, American investment consultancy that manages $ 380 million. The company is leveraged in cocoa, which means it has more positions in this market than recommended. According to Forester, his firm predicts that cocoa will be one of the best performing commodities this year and continue rising.
The Finance Minister of Ghana, Seth Terkper said at a Conference last week that the Government has learned lessons "valuable" with the problems of the current crop and that Cocobod initiatives will help revive the production next year.
Although many operators agree that Ghana should recover its production, some fear that the excess harvest sale Cocobod again, causing new scarcity. "There is a general feeling in the market that now the same problem can happen in the next harvest," says Thouvenal, Sucden.