Boston, MA -- (ReleaseWire) -- 02/13/2014 -- We continue to expect only minor production growth in Ghana's cocoa sector in the short term owing to harvest delays on the back of dry weather, and there are considerable downside risks to production due to a decision by the Ghanaian government to end a fertiliser subsidy programme. Over the long term, we forecast relatively pedestrian growth in cocoa production owing to reduced farm revenues and structural concerns in the sector, particularly related to labour. We forecast mild production growth for Ghanaian corn in 2013/14, the result of high prices during the planting season. Over the long term, however, we believe the country is likely to run a deficit due to strong demand. For livestock, we continue to expect Ghana to be a growing net importer of poultry over the long term on the back of strong demand growth.
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- Cocoa production growth to 2017/18: 28.2% to 1.1mn tonnes. Most of this growth will be due to base effects; however, we also expect significantly higher cocoa prices over the medium term owing to poor supply prospects.
- Corn production growth to 2017/18: 15.0% to 1.95mn tonnes. Ghanaian corn yields remain low in relative terms, with production still dominated by smallholders making limited use of fertilisers, mechanisation, improved seeds and post-harvest facilities. However, government-subsidised fertilisers for corn as well as technical support will lead to a mild increase in production.
- 2014 real GDP growth: 6.4% (down from 7.0% in 2013; predicted to average 6.8% from 2013 to 2018).
- 2014 central bank policy rate: 17.00% end-2014 (up from 16.00% in 2013).
- 2014 consumer price inflation (average): 12.6% (up from 11.6% in 2013).
We have revised our forecasts upward and now see LIFFE cocoa prices averaging GBP1,850/tonne in 2014 before averaging higher in the following years. This compares with our previous forecast for an average price of GBP1,750/tonne in 2014. We expect the market to register deficits for the duration of our forecast period out to 2017. Lacklustre global production growth and rising demand growth from major consumers are likely to force prices higher once the 2013/14 harvest begins. Indeed, we are forecasting a larger global deficit in 2013/14 (at 194,000 tonnes) than in 2012/13. Towards the end of the five-year forecast period, we expect prices to average slightly lower as supply growth improves on the back of high prices. This will also be a function of moderating global cocoa demand, particularly from Europe, which represents 35% of global consumption. Overall, we believe higher prices will stem from a failure of the cocoa industry (particularly West Africa's) to increase production by investing sufficiently in replacing aging trees and a reduced labour pool.
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