The situation at the global cocoa beans market

In the past period, the price of cocoa beans continued to move in a falling trend as a result of the active supply to the market of the new season and growth stocks. In addition, the global cocoa market balance in the season 2016-2017 was revised upwards due to an excess of declining processing of cocoa beans in the world. Additional pressure on prices exerted fluctuations of the currency pair USD - Pound Sterling.

World processing in Q4 2016 decreased in Europe by 0.9% in Q4 2015 due to a sharp decline of 10.1% in Germany due to the cessation of production and the Euromar bankruptcy. Processing in North America also showed a decline of 1.1%, only in Asia, it increased by 16.9% due to the growth in Malaysia.

A small cocoa beans market

A small market was supported by the unrest in Côte d'Ivoire, which continued for some time, and was quickly suppressed by the authorities. However, the excitement of military strikes coincided with the civil servants, which has already led to cuts in the plans of the largest producers to invest in the processing of beans. Processing of cocoa beans in Côte d'Ivoire since the beginning of the season 2016-2017 to the end of December 2016 amounted to 126 thousand tons.

As a result, shipments of cocoa beans from Ivory Coast ports were suspended for a couple of days because of the political unrest, which led to a slowdown in the cocoa bean exports in December 2016 and supported prices.

Exports of cocoa beans from Côte d'Ivoire since the beginning of the season 2016-2017 by the end of December 2016 amounted to 305.1 thousand tons compared to 357.5 thousand tons in the same period last season. Exports from the beginning of the season 2016-2017 by the end of December 2016 amounted to 101.7 thousand tons compared to 105.1 thousand tons in the same period last season.

At the same time, due to the fall in world prices for cocoa beans, there are problems with the performance of contracts concluded in advance: exporting, buying cocoa beans from the governmental organizations of cocoa and coffee is not currently willing to supply at lower prices. This organization cancels plans to resell 300 thousand tons previously of the contracted volumes of cocoa beans, which has even more pressure on prices. It is reported that the world market has sold about 200 thousand tons previously of the contracted volumes for delivery in January-March 2017 is mainly local exporters will suffer losses in case of failure to perform the contract in the absence of hedging forward contracts. This body will remove the data from participating in future auctions.

At the same time, the organization of cocoa and coffee promises to compensate the losses to exporters between the purchase price and sales price market from a reserve fund.

However, these problems can lead to non-payment for the entire supply chain of cocoa beans. Even now exporters do not maintain procurement price guaranteed to farmers in 1100CFA for the season 2016-2017 and buy at prices around 800-1000CFA. This situation contributes to the growth of sales of contraband to Ghana, and can also have a negative impact on the next season the whole procurement system. Guaranteed minimum price for farmers in Côte d'Ivoire for the season 2016-2017 is lowered to CCC 750CFA ($1.23/kg). As at November 25, 2016, Organization of the cocoa and coffee was pre-contracted 1.308 million tons of the season 2016-2017. At the end of January 2017 delivery of cocoa beans in Ivory Coast ports totaled 1,100 million tons, which is 1.9% higher than the same date last season.

At the same time, the interim harvest in Ivory Coast and Ghana are also expected good, which removes the likelihood of a significant reduction in stocks until the end of the season. The saturation of the major EU and US markets has led to the fact that growth in demand for cocoa beans in recent years is largely due to the increase of consumption in emerging markets, particularly in Brazil and Russia.

The excess of cocoa beans in the 2016-2017 season in the world market will be 171.95 thousand tons. Harvest in Côte d'Ivoire is estimated at 1.8 million tons, world production will grow by 9.3% to 4.405 million tons.