Cocoa Rules as Best Commodity as Ivorian Arrivals at 5-Year Low

  • Ivorian cocoa deliveries said to slow 18% from week earlier
  • Cocoa is 2015's best performer in S&P GCSI commodities index

Cocoa is prevailing as this year’s best-performing commodity after deliveries of the beans from Ivory Coast, the world’s largest producer, tumbled to a five-year low.

Arrivals at ports fell to 45,000 metric tons in the week ended Nov. 29, down 18 percent on the prior seven days, said a person familiar with the matter, who asked not to be identified because the figures haven’t been made public. It’s the lowest for that week in any year since 2010-11, according to data from KnowledgeCharts, a unit of Commodities Risk Analysis.

Cocoa futures are heading for a fourth year of gains, the longest run since at least 1989, as an El Nino weather pattern threatens damage to crops from Ecuador to Indonesia. The beans used to make chocolate are this year’s best performer in the Standard & Poor’s GSCI index of 24 raw materials with a 15 percent jump. Cotton and sugar are the only two other gainers.

While dry weather this year is taking its toll on deliveries, arrivals at ports could improve again as wet weather returns to Ivory Coast. The nation got 244 millimeters (9.6 inches) of rain from the start of October to Nov. 17, a fifth above normal, according to Speedwell Weather. That’s almost double the combined precipitation in August and September.

Recent Weather

"We’re quite convinced of a second wave of higher arrivals in March due to recent and current good weather," said Arjen Thiescheffer, a trader at Rotterdam-based Cocoanect BV. That prospect depends on the survival rate during Harmattan, he said, referring to the dry and dusty winds that normally blow in from the Sahara desert from December through January and can damage crops.

While arrivals have been falling, higher prices are curbing demand from the chocolate industry and undermining forecasts for a shortage this season. Global cocoa grindings will probably be unchanged or rise as much as 0.5 percent in 2015-16, according to Cargill Inc., the second-largest processor. That’s down from a previous forecast for growth of 1.5 percent to 2 percent, Martijn Bron, a risk management director at the company’s cocoa and chocolate unit, said on Nov. 24.

Cocoa for December delivery traded Tuesday in London at a record discount of 29 pounds a ton to futures for March. That market structure, in which earlier-dated contracts are lower than later ones, is known as contango and may signal the market isn’t worried about supply shortfalls. The spread between the months was trading at a premium as recently as Nov. 24.

Ivory Coast’s bean arrivals so far this season are still ahead of last year. Deliveries came to 513,000 tons from Oct. 1 to Nov. 29, from 500,000 tons in 2014-15, according to the person familiar with the matter.

Early Arrivals

"With the early arrivals having been high, there’s not a shortage of physical cocoa at all for the fourth quarter," said Ian Tyler, a broker at Sigma Broking Ltd. "If the declining arrivals is setting a theme, any problem will be from the first quarter onwards."

Cocoa futures for March delivery fell 0.1 percent to settle at 2,279 pounds ($3,435) a ton on the ICE Futures Europe exchange in London. In New York, cocoa for the same month was unchanged at $3,339 a ton on ICE Futures U.S. Other agricultural commodities were mixed, with Arabica coffee down 0.3 percent and raw sugar up 3.6 percent.

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