Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Cocoa futures 'building solid base of support'

Twitter Linkedin

Cocoa futures appear to be at little risk of returning to the nine-year lows reached last year, supporting by "production risks" at a time when processing margin dynamics appear "very attractive" for processors.

Judith Ganes-Chase, the respected soft commodities analyst, said that cocoa futures, having recovered some 17% in New York on a spot contract basis from last year's lows, seem "to be building a solid base of support".

While acknowledging a "massive" world output surplus in 2016-17 - when production hit a record 4.70m tonnes, 371,000 tonnes above consumption, on International Cocoa Organization estimates – some of that "simply" went to replenish run-down inventories, Ms Ganes-Chase said.

Furthermore, much of the record harvest was of poorer quality crop, meaning that "availability of good quality beans was nowhere near as abundant as the statistics show".

'Production risks'

And heading into the 2017-18 crop year, which began this month, Ms Ganes-Chase, head of J Ganes Consulting, flagged "production risks", including in West Africa, which is responsible for the vast majority of world output, and which looks set for a modest drop in volumes this year.

"There was a bout of excessive rains and flooding in the Ivory Coast and above-normal rains in Ghana that could impact the main crop and had even raised concerns about black pod disease."

Furthermore, the Indonesia, "the third largest producer, is expected to see production fall yet again".

'Very attractive'

The prospect of some output "uncertainty" was coming a time when "time when demand potential remains quite strong", helped by prices which remain low by standards of recent years.

Spot December cocoa futures stood at $2,080 a tonne on Monday, down 0.3% on the day.

The so-called "combined ratio" – the ratio of the value of cocoa butter and power, the main processing products, compared with the price of raw beans – has eased back somewhat over the past month, "from a peak of 3.83 to 3.76", Ms Ganes-Chase said.

"However, this remains considerably above year ago levels when the ratio was around 3.38, making this still a very attractive price for processors to convert beans into productions at a faster rate, pushing up cocoa grind."

By Mike Verdin

Twitter Linkedin
Related Stories

Evening markets: Wheat futures tumble to contract low, on US export downturn

Weak US export sales data hurt wheat prices, while depressing soybean futures too. But cotton prices buck the trend

Ag commodity prices face further pressure, says SocGen, urging sell bets

The bank sees scope for forward prices of the likes of corn, cotton, hogs and wheat falling well below investor expectations

Cotton top soft commodities bet for 2018, sugar the worst - Rabobank

Still, even sugar looks poised for price gains, as Brazilian output falls, the bank says. Cocoa, coffee outlooks score as reasonably bullish

Will the correct Argentine weather outlook please stand up

There appears a lack of consensus on what lies in store for the country, just as worries are growing of an imminent La Nina
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069