London, August 1 - The global cocoa market is set to remain in deficit for at least two more seasons and the average price should rise in 2009, commodity strategist Kona Haque of Macquarie Bank said in a report on Friday.
"With supply-side risks remaining high, prices will be volatile, average 126.5 cents per lb in 2008 ($2,790 a tonne) and 137 cents per lb ($2,865 a tonne) in 2009," she said.
"A more balanced market from 2010 should help international prices soften thereafter," Haque added.
Cocoa futures have risen sharply this year, setting a 28-year peak on ICE on July 1. The advanced has been driven partly by crop concerns in both Ivory Coast and Indonesia.
The benchmark September contract on ICE closed at $2,858 a tonne on Thursday, up 40 percent from the front month price at the end of 2007.
"From a historical perspective, cocoa prices are still very cheap in real terms. At current levels, cocoa prices would need to rise almost 3-fold to reach their all time high in real terms," Haque said.
"We do not believe that a new equilibrium price has been set yet, and it is reasonable to expect demand for cocoa to continue to surge -- ahead of supply," she added.
Haque said recent reports indicated the 2008/09 crop, particular in top producer Ivory Coast, had got off to a poor start while the Indonesian Cocoa Association in June said an outbreak of fungal disease had affected 60 percent of the cocoa plantations in Sulawesi, the main growing region.
Global consumption of cocoa had risen at 4.8 percent per annum over the past 5 years, compared with just 1.4 percent growth in the previous 5 years, stimulated partly by rising living standards.
She said, however, that signs of a global economic slowdown and rising raw materials costs could slow the growth rate, particularly in the United States.
"We expect the growth in grindings will slow from 3.6 percent in 2006/07 to 2.7 to 2.9 percent in 2007/08-2008/09."
Haque said strong growth in emerging Asia and eastern Europe should offset any softening in mature markets and growth should accelerate from 2009/2010 to 3.3 percent.