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Cocoa prices soar as producers and processors clash

Agence France-Presse . London | Published: 22:59, Nov 21,2020

 
 

A file photo shows cocoa pods on a tree at a plantation near Guiglo, Ivory Coast, on October 10, 2020. Tensions between cocoa-producing countries and manufacturers over costs have led to soaring prices on the international market, even as demand slumps because of the coronavirus. — AFP photo

Tensions between cocoa-producing countries and manufacturers over costs have led to soaring prices on the international market, even as demand slumps because of the coronavirus.

In New York, the price of a tonne of cocoa for delivery in December has jumped by more than 25 per cent since last Friday to $2,915 — the highest since the outbreak began.

But cocoa-producing countries are not celebrating, market observers warn, and instead point to tensions with buyers who resell the product to the chocolate industry.

‘The price disputes caused buyers to source lower-cost available cocoa elsewhere’ said Rabobank analyst Andrew Rawlings.

In West Africa, Ghana and Ivory Coast account for two-thirds of global cocoa production.

They joined forces last year to try to get more from the chocolate industry, in a model resembling that of the Organisation of Petroleum Exporting Countries cartel.

Abidjan and Accra obtained a premium of $400 per tonne of cocoa from their buyers, known as the Decent Income Differential (DRD), and applied it to the 2020-21 season.

But since then, the pandemic has ravaged global demand, and buyers are reluctant to see prices rise with a surplus in supply.

‘From my understanding, there was a request made for a concession to lower the premium being paid. This was apparently turned down,’ said commodities analyst Judith Ganes.

Instead, one confectionery giant turned to buying from ‘reserves’ in trading centres such as New York rather than buying directly from cocoa producing countries, she added.

The Bloomberg news agency quoted anonymous sources privy to the transaction as saying the buyer was US confectioner Hershey.

Hersehy told AFP in response: ‘We do not discuss details of our specific buying and hedging activities.

‘We buy cocoa from a variety of suppliers and sources to meet our ongoing business needs.

The world’s number one confectioner, US giant Mars, also said it was ‘one of the first buyers of the 2020/2021 harvest, on which we paid the DRD’.

On the New York market, the contract for delivery in March, which was less directly affected, saw its price jump by nearly 16 per cent to $2,740.

In London, a tonne of cocoa was trading on Friday for £1,829, up 13.5 per cent from last week.

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