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Europe's physical cocoa market has seen heavy bean sales from Ghana's state cocoa board this week as London prices continued to rise, traders said on Friday. European differentials for Ghana beans also rose sharply as buyers sought alternative cover following the low quality crop in Ivory Coast, they added.
"Ghana certainly sold very heavily this week, there is talk that it sold around 50,000 tonnes of beans which is a large volume by any reckoning and represents a large proportion of their crop," one trader said.
London cocoa futures climbed to fresh four-year highs at 1,146 pounds a tonne on Friday with the market well supported by industry buying but origin selling also noted on the highs, traders said.
Concern over dry weather earlier this year affecting the Ivory Coast's mid-crop and, more recently, political tensions in the world's top producer have helped push cocoa up from below 1,000 pounds in early May. Ivorian bean supplies continued to be tight, traders said. "Ghana is selling a lot, the Ivorian beans are just not around," a European physical trader said.
"They appear to have made heavy sales to both trade and industry. Basically they seemed to be just cashing in on the current high level of the London market." A substantial volume of the sales were said to be focused on May-July 2008 delivery.
"The poor quality crop in Ivory Coast coupled with more political tension seems to have generated a change of thinking among some European industrial consumers," another trader said. "There is a tendency to diversify supply sources and reduce the risk of a total focus on Ivory Coast."
Others said consumers who had held off buying in the hope of seeing prices retrace were now having to come into the market. "We are seeing customers having to bite the bullet and buy cover for the fourth quarter," one trader said. Diplomats said on Thursday that an attempt to assassinate Ivory Coast's prime minister last week was likely to delay already slow process on a new peace deal but should not cause it to derail.
"There are few alternatives to Ivory Coast apart from Ghana when high volumes for mainstream industrial chocolate production are sought. Other African countries can provide a little extra fill-in cover but not major strategic supplies."
Continuing interest in Ghana meant differentials for Ghana beans for shipment to north west continental Europe rose to 130 pounds over London contracts this week, up from 110 pounds. Cocoa butter was stable at recent highs, with European ratios quoted at around 2.83 times London September futures, unchanged on the week.

Copyright Reuters, 2007

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