Harsh weather in Ghana has pushed many in the cocoa market to predict a global deficit, a senior Olam executive said.
“We’ve been forecasting a deficit in the cocoa market for this season. And a lot of that has been the drop in production that we’ve seen in Ghana,” Gerry Manley, Olam’s global head of cocoa, said in an interview.
“We do also believe now that the rest of the market is understanding that Ghana won’t be as strong as others were expecting, which is leading other industries to bring down their forecasts, in some cases from surplus to deficit,” he said.
Singapore-based Olam International said in November that it expected a global deficit of more than 120,000 tonnes this season driven by smaller crops in Ivory Coast and Ghana, the largest and second largest producers respectively.
Then, many predicted a balanced market or even a small surplus in the wake of a record 2013/14 crop of 1.74 million tonnes in Ivory Coast.
But West Africa saw an unusually harsh Harmattan weather phenomenon in December and January.
International Cocoa Organization (ICCO) last month forecast a global cocoa deficit of 17,000 tonnes in 2014/15, compared with an estimated 30,000 tonnes surplus in 2013/14.
Cocoa purchases in Ghana have lagged well behind last season, according to statistics from industry regulator Cocobod.
Manley said global demand will rise this year by around 120,000 tonnes.
Speaking on the sidelines of the official inauguration of Olam’s new 75,000-tonne annual capacity cocoa processing plant in Ivory Coast, he added that Ivory Coast was also unlikely to match last year’s record crop.
With the development of new grinding capacity, it is poised to overtake the Netherlands this year as the world’s top cocoa processor. But the industry has been at loggerheads with the government since the latter scrapped a number of tax advantages two seasons ago.
Manley said he was hopeful that talks between cocoa grinders and the government on the issue of domestic processing planned for April would be successful.
Olam launched a bid in December to buy Archer Daniels Midland’s cocoa business for $1.3 billion. When completed it will push Olam into the 3rd place in the global cocoa field after Barry Callebaut AG and Cargill Inc.
Manley said Olam was in the process of seeking anti-trust clearances for the deal in several jurisdictions.
“We have said that we would like to have that process completed in the second quarter of this year,” he said.