Cocoa soars due to conflict between producers and industrialists

In the New York market, the tonne of cocoa for delivery in December has climbed more than 25% since last Friday, to peak at $ 2,915.

Tensions between cocoa-producing and industrial countries over the purchase price of beans have led to a surge in prices on the international market, even as demand is at half-mast with the COVID-19 pandemic.

On the New York market, the ton of cocoa for delivery in December, a contract which is therefore coming to an end, has climbed more than 25% since last Friday, to peak at 2’915 dollars, at a level more seen since the start of the pandemic.

This does not mean that cocoa-producing countries should be happy about this, warns market observers: on the contrary, this jump in prices is the consequence of the conflict between them and their buyers, the chocolate industry.

“The price dispute has pushed buyers to turn to other, cheaper sources, so they have fallen back on the New York market,” summarizes Andrew Rawlings, analyst at Rabobank.

In West Africa, Ghana and Côte d’Ivoire, which represent two-thirds of world production, have joined forces since 2019 to try to obtain more from the chocolate industry, on the model for example of the Organization of Petroleum Producing Countries, OPEC.

Abidjan and Accra had obtained from their buyers, like Nestlé, a premium of $ 400 per tonne of cocoa, applied from the 2020-21 campaign, which began in October.

But between the deal and the harvest, the COVID-19 pandemic has ravaged global demand, and manufacturers are reluctant to see prices rise as supply abounds.

“There was a request to lower the premium, which was apparently refused. One of the giants of the confectionery has decided to turn to the reserves “specific to the places of exchange like the ICE in New York, instead of buying directly from the producing countries as the big industrialists usually do it, explains Judith Ganes, Commodities Market Analyst.

“It surprised other market participants because the quantity was so large that they had to obtain an exemption from the operator,” she adds.

According to the Bloomberg agency, which cites anonymous sources who witness the transaction, the buyer is Hershey, one of the largest American confectioners.

Contacted by AFP, Hershey was not immediately available, as were the world number one and number two in chocolate, American confectioner Mars and Italian Ferrero.

“The result is that prices have jumped even as African producers still have part of the current harvest to sell,” said Ole Hansen, analyst at SaxoBank.

In the New York market, the contract for delivery in March, less directly affected, saw its price jump by almost 16% to 2,740 dollars. In London, a tonne of cocoa traded Friday for 1,829 pounds, against an increase of 13.5% compared to last week.

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