“Cocoa prices for 2017/2018 crop season depressed”

THE END OF THE COCOA’S 2017/18 crop season was marked by a downward trend in futures prices on both the London and New York market, according to the International Cocoa Organisation review of the latest developments on the international cocoa futures markets for September.

The depression was in reaction to a correction on the cumulative arrivals of cocoa beans for the 2017/18 crop season in Côte d’Ivoire as well as expectations of a strong output for the 2018/19 main crop which contributed to prices weakening during the month.

Consequently, the nearby contract traded at $2,074 per tonne and $2,244 per tonne in London and New York respectively. The London market prices at par with African origins, while the New York market prices aligns with prices of Southeast Asian origins.

Compared to its value spotted at the start of the month, the nearby contract declined by six percent in London and 11 percent in New York. Thereafter, before expiry, the September 2018 contract was exchanged at $2,079 per tonne in London while it traded at $ 2,319 per tonne in New York.

Beginning from 14 September onwards, the frontmonth contract, such as the December 2018 contract descended further in response to anticipated favourable crop prospects for the 2018/19 main crop in West Africa.

Prices, thereafter, plunged to reach their lowest value of the month on both markets settling at $1,970 per tonne in London and $2,065 per tonne in New York by the end of the month. The strong likelihood of the occurrence of an El Niño event seems not to have had any influence on market participants’ expectations with regards to the upcoming crop outlook.

The US dollar index remained stable in September while the ICCO daily price index retreated by nine percent from its value displayed at the beginning of the month. The exchange rate market did not, therefore, play any role in this price development.

Also, throughout the 2017/18 crop season, the nearby contract was priced on average at $2,205 per tonne in London and $2,268 per tonne in New York. Compared to their value recorded at the beginning of the crop year, prices by the end of September shrunk by three percent in London while they firmed slightly by 1 percent in New York during the 2017/18 crop season.

Notably in the 2017/18 crop season, the annualized volatility of the front-month contract prices reached 12 percent and 14 percent in London and New York respectively.