Cocoa futures have collapsed, losing as much as 27% in just two days, and price swings are unprecedented as few investors and companies can afford to hold trading positions, Bloomberg reports.
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On Tuesday, cocoa futures for June delivery were down 13% at one point on the New York Stock Exchange, after falling as much as 17% on Monday, the most in a single day days after 1960. This recovery in prices represents a significant change from the situation at the beginning of the month, when prices reached an all-time high of more than 11,000 dollars a ton, which made chocolate production more expensive, Agerpres says.
Even after the declines of the last few days, the price per ton of cocoa is double compared to the beginning of the year. This advance made it more expensive to hold positions and caused investors to close trades, which reduced liquidity and made the market even more vulnerable to large price swings.
The extent of the declines in recent days was a surprise, but it is possible that this decline will be short-lived, because the fundamentals have not changed, emphasizes Fuad Mohammed Abubakar, president of Ghana Cocoa Marketing Company UK Ltd.
“Market developments in recent days show that a fall is always easier and faster than a rise,” says Abubakar.
In the past six months, global cocoa prices have tripled after adverse weather developments and disease reduced the production of cocoa beans in Ivory Coast and Ghana, which together are responsible for about 60% of the world’s output. In addition, the prices cocoa farmers in Ivory Coast and Ghana receive for their beans are well below world prices, so farmers in these countries are unable to invest in plantations to increase production.
Tags: Cocoa quotations collapsed price fluctuations unprecedented
