Monthly Softs Update

December cocoa gained 4.7% over October and in so doing, hit a 25-year high of GBP2,185/tonne. Prices have been lifted by evidence that cocoa grindings in Europe and North America increased significantly on a q-o-q basis in Q3, although admittedly down marginally y-o-y. We see global cocoa production rebounding in 2010, but expect markets to remain tight on a historical basis. We project a global stocks-to-use ratio of 42.3 in 2010, up from 41.4 in 2009, but significantly below the ratio's ten-year average of 48.4. This should underpin prices over the medium term, in line with our average price forecasts

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