Coffee Cocoa prices Outlook - February 18, 2011

Coffee Cocoa prices Outlook - February 18, 2011 : COFFEE Coffee prices soared to a 13-1/2 year high. Bullish factors include (1) heavy fund buying after ICO's statement that global coffee supplies will likely be "tight" through the rest of the year as stockpiles in producing nations stay near a 40-year low of 13 mln bags, which will further extend a "precariousness of the supply/demand balance," (2) tight supplies as NYBOT-monitored coffee stockpiles have fallen for 27 straight months to a 10-3/4 year low of 1.605 mln bags, and (3) ICO's prediction that Brazil's Arabica bean output may fall 13% in the year that begins July 1 with coffee plants in the lower-yielding half of their 2-year cycle. A bearish factor is ICO's report that total 2010 global coffee exports were 97.5 mln bags, up +1.4% y/y.

Fundamental Outlook-Medium-term Bullish-Coffee prices climbed to a new 13-1/2 year high and the medium-term trend remains bullish on tight global supplies and strong demand. Coffee production in 2009/10 fell -4.5% y/y to 122.9 mln bags (ICO), but production should rebound to +9.6% y/y 134.6 mln bags in 2010/11 (ICO). Brazil's 2010/11 (Jul-Jun) production will rise 23% y/y to 55.3 mln bags on a favorable 2-yr cycle (USDA).

COCOA
Cocoa prices rallied further to a 14-month high. Bullish factors include (1) a lack of exports from Ivory Coast , the world's biggest producer, and the statement from Ivory Coast's President-elect that he will extend a ban on exports as the disputed outcome of the Nov presidential election continues, (2) concerns that cocoa being stockpiled in humid Ivory Coast warehouses will go bad if not exported soon, and (3) ICO's hike in its 2009-10 global cocoa deficit estimate to 82,000 MT. Bearish factors include (1) ICO's hike in its global cocoa surplus estimate for the 2010/11 season to 100,000 MT, and (2) weak demand after Q3 US cocoa grindings fell to +1.7% y/y from +12% y/y in Q2 and Q3 European cocoa grindings fell -4% y/y, their first decline in a year.

Fundamental Outlook-Bullish-Fundamentals are bullish on supply concerns due to civil unrest in the Ivory Coast and after ICO raised its deficit for the current 2009/10 (Oct-Sep) marketing year to 82,000 MT, although a surplus appears likely for 2010/11. World cocoa output in 2009/10 is seen changed y/y at 3.613 MMT. Demand in 2009/10 is up 4.0%, leading to a 4.1% y/y draw-down in ending stocks to 1.619 MMT and a tight stocks/consumption ratio of 44.6% (vs yr-earlier 48.4% and the 10-yr avg of 47.1%). Read More... For the latest updates PRESS CTR + D or visit Stock Market news Today

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