Milling & Baking News - September 25, 2018 - 28

Cocoa Update

Cocoa powder prices mixed
as futures fluctuate

s a top U.S. chocolate consuming
holiday (Halloween) approaches and International Chocolate
Day (Sept. 13) has just passed, the cocoa industry finds itself with plenty of
supply, uncertainty about demand and
a widely fluctuating futures market.
Meanwhile, the industry continues to
grapple with sustainably sourcing cocoa beans often grown and harvested
in poor regions under less-than-acceptable circumstances.
The International Cocoa Organization
(I.C.C.O.) estimates global 2017-18 cocoa bean production at 4,645,000 tonnes,
down 2% from the prior year. World
cocoa bean grindings, an indication of
demand, were estimated at 4,568,000
tonnes, up 3.9% from 2016-17. Carryover

Cocoa bean futures vs. 10-12% natural cocoa powder

$2,760

$2,520

$2,280

$2,040

$1,800

Oct. Nov. Dec.
2017

Jan. Feb. March
2018

stocks on Oct. 1, 2018 (the beginning
of the 2018-19 cocoa bean marketing
year), were forecast at 1,757,000 tonnes,
up 1.8% from 2017, with a stocks-togrindings ratio of 38.5% compared with
39.3% the prior year.
Regionally, second-quarter cocoa bean
grind (the most recent data available)
showed mixed results. North America
grind, reported by the National Confectioners Association, was down a disappointing 3.1% from the same period last
year. But European grind jumped 7%
from April-June 2017, and Asian grind
surged 15% from a year earlier.
Cocoa powder prices in the United
States have shown mixed price moves
in 2018 with 10% to 12% natural powder up about 10% since Jan. 1 at 85c to
95c a lb, as quoted by Milling & Baking
News. The price of black cocoa powder
also was up about 7% so far in 2018. But
prices for 10% to 12% alkalized and red
alkalized (Dutch) both were down about
5%. Prices for all grades of cocoa powder
28 / September 25, 2018

Milling & Baking News

April May June

July Aug.

Sept.

cents per lb

per tonne

$3,000

were slightly below year-ago levels.
Trade sources indicate cocoa powder
buyers mostly are well covered into
2019 and some even buying into 2020.
With only a minimal carry in New York
cocoa bean futures (about $100 per
tonne from nearby December to May
2020 last week), and no indication of
supply tightness, there has been little
incentive to book too aggressively. At
the same time, the flat price may have
encouraged some booking as a move up
in futures appears a bit more likely than
a significant move down.
New York cocoa bean futures have
been on a rollercoaster ride so far this
year. The nearby contract began the year
around $1,850 per tonne and experienced
a tremendous uptrend of about 55%

to near $2,900 per tonne by late Aprilearly May. Prices subsequently tumbled
about 20% to below $2,300 per tonne in
early June. Following another rebound
through early July, prices again turned
lower, dipping briefly below $2,050 per
tonne in early August, followed by another climb over $2,350 by late August.
Nearby prices last week were trading
near $2,200 per tonne, up about $200, or
10%, from a year earlier. Sources contend
that most of the volatility in the futures
market is the result of speculative trading
activity rather than major shifts in market
fundamentals.
On the sustainability front, Mars Wrigley Confectionery last week announced
"Cocoa for Generations," an initiative to
invest $1 billion over 10 years to overhaul
the cocoa supply chain. The plan is incremental to Mars' "Sustainable in a Generation" plan announced in 2017.
Mars' Cocoa for Generations plan has
two primary pillars: Responsible Cocoa
Today and Sustainable Cocoa Tomorrow.

Mars set a goal to make 100% of its cocoa from the Responsible Cocoa program
sourced globally and traceable by 2025,
with systems in place to address deforestation, child labor and higher incomes
for cocoa bean farmers. The company will
provide satellite-based GPS locations for
farms to ensure that cocoa beans do not
come from protected forest areas. Mars
plans to work with its partners to ensure
the model for premiums paid for responsibly-produced cocoa is overhauled to
ensure that farmers get a higher share
of the premium. At the same time, Mars
said it would maintain its current certified cocoa levels with the Rainforest Alliance and with Fairtrade.
Secondly, Mars hopes to show that a
step-change in farmer income and livelihood is possible. It plans to test ways to
increase productivity, income, resilience
and overall sustainability through crop
and income diversification, gender programs, village and savings and loan models and farm development plans.
In instances in the past, industry efforts
to improve production and income for
cocoa bean growers have been frustrated
by local governments or resulted in overproduction, which in fact caused prices to
decline.
The Hershey Co., Mondelez International and others also have been investing in cocoa sustainability. Hershey
earlier this year said it plans to invest
$500 million through 2030 in "Cocoa For
Good," a program focused on West Africa, where about 70% of the world's cocoa
beans are grown, to address poor nutrition, poverty, at-risk youth and vulnerable ecosystems. Mondelez last year said
it had made significant progress in its
longer-term commitment to sustainably
source 100% of its cocoa supply through
its "Cocoa Life" program. MBN
- Ron Sterk
bakingbusiness.com / world-grain.com

http://STOCK.ADOBE.COM http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - September 25, 2018

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