Cocoa succumbs to commodity rout

Cocoa finally converged with other commodities, enduring a turbulent week as it hit six-month lows amid bearish news and fund liquidation.

The key chocolate ingredient was one of the leading performers on the commodity markets in 2015, gaining more than 15 per cent.

However, it fell to £2,022 a tonne last week on large sell orders as a lurch lower in the oil price fractured confidence across the resources sector.

Prices later rebounded slightly, and on Friday, cocoa was trading at £2,100 a tonne, down 6.5 per cent from the start of the year and 1 per cent on the week.

Cocoa’s recent declines “could well be associated to the liquidation of positions by funds, facing difficulties in other markets”, said Justin Grandison, director of cocoa brokerage at ABN Amro.

The commodity has been rising steadily since early 2013, supported by reports of adverse weather and higher chocolate demand. It defied weakness in the oil and metals markets, hitting a four-year high of £2,332 a tonne in December.

On top of the overall commodity price declines, cocoa was pressured by “fresh fundamental bearish news” this week, said Eric Sivry at Marex Spectron, the commodity brokers.

First, prices were hit by worries of international chocolate demand after the latest sales numbers from Barry Callebaut, the Swiss chocolate maker.

Although the company reported stronger than expected volumes and sales, it cited Nielsen figures showing a 3.7 per cent fall in sales in the overall chocolate market in the three months to November.

Higher than expected crop flows from the number one and two producers — Ivory Coast and Ghana — also depressed prices.

Ivory Coast arrivals — the industry term for output sent to trading hubs — is thought to have been about 850,000 to 860,000 tons at the end of December, more than 6 per cent higher than previously predicted.

“The 860,000 tonne figure was 9,000 tonnes above last year’s number. This is in a year when arrivals were supposed to ‘drop off a cliff in November and December’,” said Sivry.

Meanwhile, purchases by Ghana’s cocoa authority hit 590,000 tonnes on January 14, suggesting that the overall numbers for the season would beat original forecasts.