Cargill Inc, a leading producer and distributor of agricultural products, sees the cocoa market broadly balanced in the current 2017/18 season and is aiming to expand its processing capacity in producer countries.
Crops in West Africa got off to a strong start in 2017/18, but production tapered off, reducing the chance of another global surplus, Francesca Kleemans , Cargill's commercial director for cocoa told Reuters on the sidelines of a conference in Berlin on Tuesday.
"The 2017/18 season got off to a good start," she said. "However, we are not expecting that same level of surplus. So we're more looking at a balanced supply and demand outlook."
Cote d'Ivoire and Ghana, both West African countries, are the world's number one and two producers of cocoa, respectively.
The market saw a large surplus in the 2016/17 season, which the International Cocoa Organisation (ICCO) has estimated at 300,000 tonnes, pressuring global prices to their lowest in more than nine years.
Madam Kleemans pegged the more balanced market in 2017/18 on a combination of smaller crops in West Africa and more global demand, partly due to lower prices.
"We are seeing demand accelerating, which has been helped by the price," she said. "And of course, we're expecting lower crops than the record levels of last year."
Madam Kleemans noted the mid-crop outlook in West Africa was positive, as drier weather in February was offset by good rains last month.
Early indications also signal there may be a broadly balanced market in 2018/19 as well, although it is still too early to gauge main crop development, Madam Kleemans said.
"We have to be prudent because that crop is just now appearing as flowers in the trees," she said. "The weather in the summer is going to be pretty critical."
Going forward, Madam Kleemans said Cargill saw opportunity in processing in producer countries and was looking to increase its grinding capacity by an average of two to three per cent per year, in step with global growth.
"We're looking at further growth and Africa is on our radar from a processing growth perspective," Madam Kleemans said, noting Cargill currently grinds about 800,000 tonnes of cocoa per year.
Globally, processing in producer countries is set to hit two million tonnes this year, Madam Kleemans said, amounting to about 46 per cent of grinding.
"These are records and the percentage of grinding (in producer countries) has been growing steadily," she said. "This is an ongoing trend and as Cargill we want to continue to play an ongoing role in that."
Madam Kleemans noted expanding processing in origin countries allowed the likes of Ghana and Cote d'Ivoire to gain additional skills and diversify their incomes.
"Through diversification, we can then mitigate the volatility that exists in our market," she said.
She also said Cargill was still gauging the extent of Cote d'Ivoire's plans to halt company schemes that distribute high yield seeds amid concerns they may contribute to oversupply.
"We're committed to sustainable cocoa development and solutions that work for all stakeholders," said Madam Kleemans. "So if the government of Cote d'Ivoire has concerns, for sure, we want to sit at a table and understand them."
However, Cargill maintains higher cocoa yields on less land are key to improving farmer incomes and Madam Kleemans noted tackling illegal encroachment into forests must be halted to curb oversupply.
Cargill Ghana Limited, a subsidiary of Cargill Inc, operates as a cocoa processing company at the Free Zone Enclave in Tema Industrial Area. Cargill has been sourcing cocoa from Ghana for over 40 years and in 2008 opened its state-of-the-art cocoa processing facility in Tema.
Today the company has around 400 permanent and contracted employees processing cocoa products to service food and confectionary customers locally and around the world.