Cocoa-Crop Outlook Improves After `Very Good’ West Africa Rains

(Bloomberg) – The return of rainfall to West Africa, the world’s largest cocoa-producing region, is helping reduce crop stress, with the outlook for production now appearing “more manageable,” according to Cocoanect BV.

Ivory Coast and Ghana, the world’s biggest growers, received “very good” rainfall last month, the Rotterdam-based trader said in an e-mailed report. Dry weather in the third quarter was hurting crops in the region, with precipitation in Ghana 50 percent below normal in the 90 days to Nov. 2, the driest since 1999, according to Speedwell Weather.

Farmers in Ivory Coast will gather 1.1 million to 1.15 million metric tons of cocoa during 2015-16’s main crop, while the smaller of two annual harvests will amount to 400,000 to 450,000 tons, Cocoanect estimated. Final production will probably be at “the upper end of these figures” due to the improvement in weather conditions, the trader said.

“With recent good rains in West Africa, we think that the worst concerns over production for this season have been calmed,” Cocoanect said. “These rains should aid the tail of the main crop and support the start of the midcrop.”

Cocoa futures traded in New York rose 12 percent this year as an El Nino weather patterned threatened crops from Ecuador to Indonesia and output in Ghana fell short of a government forecast last season. Dry weather had also been threatening crops in West Africa, raising concerns global supplies will fall short of demand. The beans are this year’s best performer in the Standard & Poor’s GSCI index of 24 commodities.

The return of rains is adding to large deliveries of beans to ports in the world’s leading producers to ease supply concerns. Arrivals in Ivory Coast are 28 percent higher than a year earlier, according to a person familiar with the government data. In Ghana, purchases through Oct. 22 were the highest in five years, data from KnowledgeCharts, a unit of Commodities Risk Analysis, showed.

“With these long-awaited rains and also better-than-expected start on arrivals, the overall outlook for West African production this season starts to appear more manageable,” the trader said. The arrivals “should act as some buffer to the expected shortfall later during the crop due to the summer dryness,” it said.

While the outlook in West Africa has improved, the crop in Ivory Coast will still be smaller than last year’s record of 1.8 million tons and El Nino still poses risks for crops in Ecuador and Indonesia, the world’s third-largest grower. Farmers in Indonesia will gather 300,000 to 325,000 tons in 2015-16, less than the 350,000 last season and down from the nation’s historical high of 500,000 tons, Cocoanect said.

“With the rainy season about to begin, it will be crucial to see whether we see normal rains during the coming months or if El Nino will cause drought conditions in the region as one would normally expect,” the trader said, commenting on Indonesia. “As it stands now we would actually need some weeks of above average rainfall in order to make up for the shortfall during the recent dry spell.”

In Ecuador, El Nino could bring more than double the normal rainfall in the first quarter of next year, Cocoanect said. This could have a detrimental effect on the nation’s crop.