LONDON, April 6, 2011 - The almost half a million tonnes of cocoa that has piled up in top producer Ivory Coast, as months of sanctions halted shipments, is expected to still be fit for export despite heat and humidity, analysts said.
There have been fears that the cocoa was at risk of rotting.
Jonathan Parkman, joint head of agriculture at brokerage Marex Financial, told
Reuters Insider television on Wednesday that 100,000-150,000 tonnes of cocoa was unhedged and that this could have a bigger impact on prices than the resumption of shipments.
Commodity traders routinely use futures to hedge their risk when holding physical cocoa. Increased hedging would tend to weigh on futures prices.
Parkman said cocoa futures could fall by some 5-10 percent below what he called their fair value as exports restarted.
"Most of the reports say the damage has not been too bad," he said referring to some 450,000 tonnes in stock. "It will be useable."
Keith Flury, senior analyst with Rabobank, also told Reuters that he believed the stores were exportable and that any damage was limited.
He said he thought the market had already priced in the likelihood that the stores would be exportable.
Flury said he forecast a global cocoa trade deficit of 30,000 tonnes in 2011/12 after a surplus of 168,000 tonnes in 2010/11.
"As we have less political strife, fundamentals can drive prices," he said.
Cocoa trade in Ivory Coast, which accounts for around 40 percent of the world's cocoa, has been halted by an export ban called by presidential claimant Alassane Ouattara, who now seems poised to take power from Laurent Gbagbo.
The two rivals engaged in a power struggle after contesting results of a Nov. 28 election, plunging the country into violence that has killed more than 1,500 people.
The international community backed Ouattara as the rightful winner of the poll.
The analysts said the likely departure of Gbagbo from power soon augured well for mid crop output prospects, as workers who had fled plantations would return.
Also, mid crop harvesting is just beginning in early April.
"This is the absolute nadir of the crop," Parkman said.
ICE cocoa futures prices have fallen by a fifth since hitting a 32-year high at $3,775 per tonne a month ago.
