Investors eye sluggish Ivorian cocoa volumes


Cocoa prices are near three-year lows - with sellers banking on ideas that the current slow pace of deliveries of beans from Ivorian producers will prove to be a blip.

Expiring December cocoa futures in New York lost more than 8% in the previous two sessions, under pressure from what are seen as ideal conditions in Cote D'Ivoire, the world's top cocoa grower.

With big supplies expected from West Africa, there appears to be little interest in old-crop cocoa at the exchanges.

Improving outlook

"Moisture levels have improved considerably in recent months, and sufficient rainfall is also forecast for the time being," noted Commerzbank.

"Numerous observers now expect the global cocoa market to show a surplus in the 2016-17 season after having posted a deficit in 2015-16," Commerzbank said.

But the fall in prices defies the fact that the new crop appears to have been slow to arrive so far this season, which started in October.

Slow start to arrival

"The funny thing is the cocoa season isn't' going very well," Edward George, head of group research at Ecobank told Agrimoney.

Cocoa arrivals at Ivorian ports are estimated at around 252,000 tonnes by November 6, down  about 30% year on year at 362,000 tonnes.

"Everyone expected a very strong start," Mr George said, "but cocoa futures are way down… I'm a bit puzzled".

Weak mid-crop

Mr George suggested that the slow start to the season was down to the very weak mid crop this year.

The mid crop, which is harvested in the May to August period, yields smaller, lower grade beans.

Farmers often hold onto these beans later in the season, holding out for the new-season farm gate price.

When the main crop starts in October, farmers can mix older, smaller, mid crop beans in with their new supplies, and get higher prices per tonne.

But this year's mid crop was hit by a strong harmattan, the dry winter wind which blows yearly over West Africa.

"So there weren't all of these beans to carry over," Mr George said. "It could be we're seeing a normal start to the season [barring the missing mid-crop beans]."

Commerzbank said the arrivals "will improve once the delayed negative consequences of the long dry spell, which had a huge impact on the mid-crop in particular, gradually peter out".

Look out for red flags

 "We still expect that the crop will be up on last year," Mr George said, but he warned that prices could move sharply upward if those deliveries don't start to catch up.

"The telling moment will be by the end of November. If arrivals are still lagging people will need to reassess the crop

"If this goes on much longer it will be a red flag."

March cocoa prices in New York were up 0.6% in morning deals, at $2,459 a tonne.

March London cocoa futures were up 0.4% at £2,038 a tonne in afternoon deals there.


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