Cocoa beans from Indonesia's main growing island of Sulawesi were offered $250 below New York futures on a free-on-board basis, its lowest in at least five years, as grinders cut purchases, dealers said on Thursday. Indonesia mainly exports beans to Malaysia, Brazil and the United States.
Cocoa grindings in Malaysia, which Asia's largest grinder, dropped 17.9 percent to 67,104 tonnes in the first quarter of 2009 on falling demand for cocoa products. US cocoa futures ended lower for the third straight day on Wednesday on chart-based selling and pressure from a weak pound against the US dollar. Benchmark July dropped $51, or 2.2 percent, to settle at $2,326 per tonne.
Cocoa futures have been hit by heavy selling due to deteriorating fundamentals. The International Cocoa Organisation has forecast that global cocoa grindings could fall 6.0 percent in the year to September 2009, marking their biggest decline in half a century. "We haven't bought beans for a while because we need to reduce inventories. We once bought Sulawesi beans at discount of $220 in 2005, and that was the best discount ever," said a grinder in Malaysia.
Despite poor demand, some Indonesian dealers also offered beans at a discount of less than $200 under New York futures. "For good quality beans, The discount is around $180 for June-July shipment. It has been around this level for three to four months," said dealer in Jakarta.
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