Franc view: Cocoa’s implacable market has claimed a scalp in the name of Japanese trader Itochu Corp, via its partnership with the Transmar Group. Transmar currently faces a precarious financial situation which could impact its other investments along the West African cocoa belt, most recently the cocoa processing unit in Douala, Cameroon – Noha Nyamedjo & Transmar SA.
Itochu, one of Japan’s largest trading groups, is exiting its cocoa venture with the Transmar Group, a family-owned cocoa trader and processor, entered into in 2016. This, after suffering losses on its investments in the 4th quarter of 2016. This period coincides with the start of the cocoa season in West Africa which has seen a precipitous decline in cocoa futures.
Transmar’s cocoa operations have been hard hit by ‘unfavourable’ cocoa markets (via its German supplier Euromar) and fluctuations in the British pound, in which most cocoa contracts are traded. The JV – Transmar Group Ltd – was UK based and controlled the bulk of the company’s global cocoa operations.
FrancTrade.com understands that these losses are partly related to suboptimal hedging decisions in the derivatives market.
Transmar’s US unit has since filed for bankruptcy following a declaration of insolvency by the group’s European division in December 2016.
That said, Itochu intends to continue with the cocoa business through other channels as it strategically eyes rising chocolate demand in Asia.
Franc market roundup: Cocoa was unable to hang on to marginal gains over the course of the week ending February 3 with prices closing nearly 4% below their highs at USD 2072 per tonne. The market has been battered by weak fundamentals and souring investor sentiment. According to the US CFTC, as of January 31, large investors cut their long positions in cocoa to the lowest in five years as they opted for better supported markets like cotton. This in itself could trigger some opportunistic buying.