Cocoa rally fading as African rains erase shortage

March 15 (Bloomberg) -- Rain across parched cocoa plantations in West Africa, which supplies 69 percent of the world’s beans, is leading analysts to pare forecasts for shortages, threatening the biggest rally in a year.

Global output should about match demand in the crop year ending in September, compared with the 94,000-metric-ton deficit seen last month, according to estimates by Marex Spectron Group, which trades the beans in New York and London. Prices may drop 8.4 percent to $2,000 a ton by July, according to Rabobank International and Lome, Togo-based Ecobank Transnational Inc., which financed $227 million of cocoa and coffee trading in 2011.

Prices rose as much as 21 percent in the past two months as dry winds blowing from the Sahara toward the Atlantic battered West African plantations before a mid-crop harvest that starts next month. Farmers have struggled to keep up with a 38 percent expansion in the chocolate market since 2006, which London-based Euromonitor International Ltd. values at $105 billion. Cocoa output rose 15 percent to 3.96 million tons since 2006-07, according to the International Cocoa Organization.

“Recent rains in West Africa have been plentiful, particularly in Ghana, and this is positive for the development of the mid-crop and the new crop,” said Eric Sivry, the London- based head of Marex Spectron’s agriculture options brokerage. “Many analysts have been caught by surprise.”

Cocoa climbed 3.6 percent to $2,185 this year on ICE Futures U.S. as the Standard & Poor’s GSCI index of 24 commodities advanced 8.7 percent. The MSCI All-Country World Index of equities rose 12 percent. Treasuries lost 1.7 percent, a Bank of America Corp. index shows.

Meteorological Service

Ivory Coast’s central-western Daloa region, the biggest producing area of the world’s largest supplier, got no rain in the first 20 days of January, data from the country’s National Meteorological Service show. That reversed in February, with 82.1 millimeters (3.2 inches) of rain, or 11 percent more than a year earlier, the data show.

The rain may boost the country’s mid-crop to 350,000 tons, 10 percent more than the 10-year average, according to estimates from Ecobank and the London-based ICCO, whose members account for about 85 percent of global output. Output could reach 400,000 tons should the rain continue for another month, Ecobank estimates. About 20 percent of West Africa’s annual production is harvested from April to June.

In Ghana, the second-biggest producer, rain didn’t arrive in most of the largest growing area until the end of January, according to the Ghana Meteorological Agency. The town of Bogoso in the southern region got 91.1 millimeters in February, 79 percent more than a year earlier, the data show.

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