LONDON: Cocoa futures on the ICE exchange hit four-month lows on Friday and headed for 3% losses for the week, amid a large increase in ICE-certified stocks and benign weather forecasts for West Africa.
COCOA
London cocoa fell 3.6% to 6,110 pounds per metric ton at 1259 GMT. Dealers noted ICE-certified stocks have shot up to their highest since early January ahead of the expiry of the front month cocoa contract later this session.
They added that weather reports for Ivory Coast, Ghana and parts of southern Nigeria are favourable for the next ten days, with a pickup in downpours towards the end of the period. New York cocoa fell 3.7% to $7,879 a ton.
COFFEE
Arabica coffee fell 1.4% at $3.8045 per lb. Robusta coffee fell 1.1% to $5,466 a ton.
Rabobank said it expects ICE-certified stocks of both robusta and arabica to increase in the weeks ahead, as both types of coffee traded at tenderable parity in certain origins at various points over the past few months. It said the stock increase should pressure prices over the coming few weeks.
Coffee price shocks take about a year to feed through to consumers Raw coffee price shocks take about a year to feed through to consumers while the residual impact lasts at least four years, according to a report published on Friday by the United Nation’s Food and Agriculture Organisation (FAO).
Thanks to persistent adverse weather crimping supplies and eating into global stockpiles, raw coffee prices have been on a tear, with arabica gaining 70% on the ICE exchange last year and more than 20% so far this year.
According to the FAO, about 80% of these price rises will feed through to consumers over the course of 11 months in the European Union, while in the United States 80% of the rises will feed through over 8 months. The US and the European Union are by far the world’s largest coffee consuming regions.
Price rises for consumers are likely to be much lower than the rise in the cost of raw beans as there are other factors that contribute to retail coffee prices, such as transport, roasting, packaging, certification and retail mark ups.
According to the FAO report, a 1% increase in the cost of raw beans in the EU translates into a 0.24% increase in the retail price after 19 months, “with the shock persisting for several years”.
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