Cocoa Price Reaches 10-year high on Falling Production and Growing Demand
Date : January 6, 2010
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Riding growing demand, price of cocoa beans have scaled 10-year high in the Indian market. Dry beans are today quoting at Rs 140-150 per kg, a 30 per cent growth over the average Rs 110 per kg quoted last year. Prices in the international markets have also moved to new highs.
Amidst falling production, prices are expected to remain firm in near future. According to Directorate of Cashew and Cocoa Development, domestic production this year is expected to be around 12,000 tonnes, about the same as last year\'s production of 11,820 tonnes. This would meet only about 50 per cent of the domestic demand and the rest would have to be imported (India is a net importer of dry cocoa beans).
Trade sources, however, expected a 10-20 per cent decline in production this year and said prices have already surged beyond Rs 150 levels. Negligible pre-summer rains during January-February had put the June-July crop under pressure.
Heavy and incessant rains in July-August widely damaged young buds and pods, thereby reducing the second October-November crop. Most chocolate producing companies in India are gearing up for further imports despite the high global prices and an import duty of 35 per cent.
They are also vying for dry cocoa beans from the farmer. While large companies like Cadbury India require around 15,000 tonnes of dry cocoa a year, nearly all of them have to import 50 per cent of their requirement. They hope to import before the international prices firm up further.
Falling Global Production
The crop from Ivory Coast, the world\'s largest cocoa producer, is expected to dip sharply to around one million tonnes this year, from 1.36 million last year. Ivory Coast and Ghana together account for close to 60 per cent of global cocoa bean production. According to revised estimates from the Cocoa Producers Alliance (COPAL), which represents over 75 per cent of global production, output for 2008-09 is expected to fall nearly six per cent to 3.51 million kg — down from 3.73 million kg last year.
Even as the inventories of producing countries and multinational companies firmed up, global prices have been on a clear uptrend. Spot prices at London markets closed at $3.56 per kg, according to the International Cocoa Organisation (ICOCO). However, March futures were down, anticipating improved crop during the current winter season.