UPDATE 2-Hershey says U.S. cocoa stocks will last ‘well into next year’
By Luc Cohen
Oct 17 (Reuters) – U.S. chocolate manufacturer Hershey said on Friday that U.S. cocoa stocks are high enough to prevent disruption to supplies well into 2015, playing down concerns that Ebola in West Africa could roil the $12 billion global cocoa market.
More than half of the annual cocoa supply needed for the United States is already in the country, one of the world’s top consumers, a company spokesman said in an email to Reuters.
The comments from the maker of Hershey’s Kisses, some of the most candid from the industry, came as the global death toll from the disease that has ravaged three West African countries rose and calls for a U.S. travel ban from West Africa grew louder.
Ivory Coast and Ghana, which together produce 60 percent of the world’s cocoa beans, have not reported any cases of the deadly Ebola virus, which has killed more than 4,500 people in Liberia, Sierra Leone and Guinea.
But concerns are mounting the epidemic may spread across the border, cutting off critical supplies of raw materials from Ivory Coast, which produces 40 percent of global supplies.
Major suppliers have contingency plans in place, which they are prepared to roll out in the event of a supply disruption, one source said.
“Our suppliers have assured us they will be able to continue to supply our cocoa orders without interruption, even if the disease begins to impact the major cocoa-growing countries in the region,” a Hershey spokesman said.
Stocks in warehouses registered with ICE Futures U.S. are just under 250,000 tonnes, down 5 percent from a year ago. That accounts for about half of the country’s total annual demand.
Cocoa prices on the ICE Futures U.S. exchange have surged to 3-1/2 year highs in recent weeks. Soaring prices have already forced Kraft, Hershey and Mars to hike retail prices.
In the medium term, the Ebola outbreak is unlikely to significantly disrupt the market, though it has “seriously curtailed” production in the three hardest-hit countries, all minor producers, the International Cocoa Organization (ICCO)said in a statement on Friday.
Hershey, which relies on third-party suppliers to source its beans, said it was prepared to source cocoa from other tropical origins in the event of a supply disruption, including Ecuador, the Dominican Republic, Mexico and Peru.
Still these countries combined accounted for just 9 percent of world production in the 2013/14 crop year, according to ICCO projections.
Trader Archer Daniels Midland, which has cocoa processing operations in Ivory Coast and Ghana, said its operations had not been impacted, while manufacturer Nestle said it was too early to predict how Ebola would impact business.
The chocolate industry is no stranger to supply scares from the often volatile region. Ivory Coast experienced two civil wars in the past 12 years, yet cocoa continued to flow out of the country, traders said. (Reporting by Luc Cohen; editing by Grant McCool and Andrew Hay)