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Across Your Markets

First production of LNG has successfully started from the Hilli Episeyo vessel off Cameroon. Hilli Episeyo has a relatively small production capacity of 2.4 million tonnes a year and its first cargo will be loaded around early April 2018 (Bloomberg).     The Monetary Policy Committee of West Africa’s CFA regional central bank (BCEAO) holds its benchmark interest rate unchanged at 2.5 percent (7 Mar 2018)    Cote d’Ivoire and Cameroon among the top 5 banana exporters to Spain with volumes of around 5,000 tonnes and 3000 tonnes respectively in August 2016    LafargeHolcim is expanding cement production capacity in Cameroon to 2.1million tonnes from 1.6 million tonnes to compete more aggressively with Dangote which plans to boost capacity to 3 million tonnes within 3 years     Uber technologies plans to offer its services in Cote d’Ivoire, Cameroon and Senegal in 2017 according to Alon Lits, its general manager for sub Saharan Africa    Nestlé, Brasseries du Cameroun and Camlait now among 55 companies allowed export duty-free access to the central African economic bloc

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Friday, December 14, 2018

Cocoa’s Cinderella moment (featuring Ghana, Côte d’Ivoire, Cameroon, Brazil and Indonesia)


Franc view: The combination of tighter supply, rising demand and positive short-term technicals (the RSI appears deeply oversold) suggest cocoa prices will not return to the doldrums of 2017.

The Ball

Cocoa’s glittering rise, from $1,809/tonne on December 22, 2017 to a high of $2,914/tonne on May 1, 2018 (NY futures), was reminiscent of the Bull Run of H2-2013–the lead-up to a cocoa supercycle that lasted three years. The gain of over 61% (281% annualised) was primarily on concerns of a potential shortfall in output in the 2017/18 season, with estimates for a deficit of up to 200,000 tonnes. And with speculators having been short in the wake of a large surplus in 2016/17, the risk for a sharp price correction in the event of production jitters was to the upside.

cocoa-422938_640The not-so-belle—Cameroon beans

The rally in the New York market also reflected concerns over the quality of beans delivered to the London exchange, with the London market awash with low quality beans from Cameroon which market participants were reluctant to take—traders were apparently worried that certificates for Cameroon beans that were close to expiring would not be renewed. A situation which created an arbitrage opportunity for other West African supplies—Ghana and Côte d’Ivoire to be delivered to New York. However, the rally seems to have come to a screeching halt with prices dropping 21% since May 1 to $2,289/tonne as concerns over the weather and output fade.

The fairy godmother—Growing demand 

However, the downside in prices might be limited with the International Cocoa Organization forecasting a tightly balanced market this season and agribusiness giant Olam—which is itself boosting its global grind capacity—also optimistic on demand even from producers like Indonesia and Brazil. Indonesia, the third largest cocoa grower is now a net importer because of the expansion in domestic processing. Similarly, firm demand is emanating from Brazil, traditionally the 7th largest producer—where increasing processing capacity has prompted the country to reopen its market to beans from Côte d’Ivoire. Around 60,000 tonnes are likely to be imported from both Côte d’Ivoire and Ghana to avoid interrupting their grinding season, according to Brazilian cocoa grinders.

 

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FrancTrade provides independent analyses and commentary as well as bespoke commodities market intelligence to global and regional corporate and institutional clients with a stake in the Francophone Africa CFA franc zone. FrancTrade also publishes one-off special reports on commodities and trade in strategic West African markets, including Nigeria and Ghana.