July 14 - The current review of the cocoa market situation reports on price movements on the international markets during the month of June 2008. Chart I illustrates price movements on the London (LIFFE) and New York (ICE Futures U.S.) markets in June. Chart II shows the evolution of the ICCO daily prices denominated in U.S. dollars and SDRs for the period from April to June 2008. Chart III depicts the link between the ICCO daily prices and the Dow Jones commodity index. Table 1 presents some price record levels reached by cocoa beans and the extent of the recent increase.
Price movements
In June, the ICCO daily price averaged US$3,022 per tonne, up by US$332 compared to the average price recorded in the previous month (US$2,690) with a range of between US$2,827 and US$3,206.
The sharp rise in cocoa futures prices initiated in the last week of May 2008 continued in June, with prices breaching the US$3,000 per tonne level in New York and the £1,500 per tonne in London in the course of the month. As shown in Table 1, both cocoa futures markets reached new record levels at the end of the month, with prices in London surging to their highest level for 22 years, at £1,662 and reaching their highest level for 28 years in New York, at US$3,150. Similarly, in nominal terms, the ICCO daily price, averaging prices in both futures markets, reached a 28-year high in US$ terms and a 22-year high in SDRs terms (the SDR unit relates to a basket of major currencies used in international trade: US$, Euro, Pound Sterling and Yen). The stronger increase in US$ terms is due to the weakness of the US$ compared to the other major currencies in recent years. For buyers in the Euro zone, the increase in the price of cocoa beans experienced in the past two years has not been as strong as for buyers using the Pound or the U.S. dollar. Supply and demand for cocoa was the main driver for this development in the cocoa market, with the stocks-to-grindings ratio expected to reach a 22-year low at the end of this season.
Most commodities experienced a price increase in une, as depicted by the movements of the Dow Jones commodity-AIG index in Chart III, which tracks price movements across various commodities (cocoa not included). However, the cocoa market benefited from a more favourable environment than most other commodities. In total, international cocoa prices increased by 13% in US$ terms during the month while the index rose by a lower rate of 8%.
Supply & demand situation
As stated in the previous review, the volume of cocoa reaching ports in Côte d’Ivoire in the first two months of the mid crop period (April-May) had been disappointing compared with expectations. However, the situation slightly improved in June with 79 thousand tonnes reaching ports (15 thousand tonnes more than in the previous season), bringing the total for the first three quarters of the current season at 1.241 million tonnes, according to data published by news agencies. In Ghana, preliminary data showed that the main crop, which ended officially on 5 June, may have reached 663,558 tonnes, up by 76 thousand tonnes compared to last season. The light crop is expected to yield around 50 thousand tonnes. Meanwhile, in Indonesia, a large share of cocoa farms has been infected with Vascular-Streak Dieback (VSD). The impact on cocoa output is expected to be much larger than previously expected.