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Cocoa

Cocoa is the common name for a powder derived from the fruit seeds of the cacao tree. The Spanish called cocoa “the food of the gods” when they found it in South America 500 years ago. Today, it remains a valued commodity. Dating back to the time of the Aztecs, cocoa was mainly used as a beverage. The processing of the cacao seeds, also known as cocoa beans, begins when the harvested fruit is fermented or cured into a pulpy state for three to nine days. The cocoa beans are then dried in the sun and cleaned in special machines before they are roasted to bring out the chocolate flavor. After roasting, they are put into a crushing machine and ground into cocoa powder. Cocoa has a high food value because it contains as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat. It is also mildly stimulating because of the presence of theobromine, an alkaloid that is closely related to caffeine. Roughly two-thirds of cocoa bean production is used to make chocolate and one-third to make cocoa powder.

Four major West African cocoa producers, the Ivory Coast, Ghana, Nigeria and Cameroon, together account for about two-thirds of world cocoa production. Outside of West Africa, the major producers of cocoa are Indonesia, Brazil, Malaysia, Ecuador, and the Dominican Republic. Cocoa producers like Ghana and Indonesia have been making efforts to increase cocoa production while producers like Malaysia have been switching to other crops. Ghana has had an ongoing problem with black pod disease and with smuggling of the crop into neighboring Ivory Coast. Brazil was once one of the largest producers of cocoa but has had problems with witches' broom disease. In West Africa, the main crop harvest starts in the September-October period and can be extended into the January-March period. Cocoa trees reach maturity in 5-6 years but can live to be 50 years old or more. During the course of a growing season, the cocoa tree will produce thousands of flowers but only a few will develop into cocoa pods.

Cocoa futures and options are traded at the ICE Futures U.S. (ICE) exchange and on NYSE-LIFFE exchange in London. The futures contracts call for the delivery of 10 metric tons of cocoa and the contract is priced in US dollars per metric ton.

Prices – After posting a 31-year high of $3,510 per metric ton in December 2009, cocoa prices moved lower to a 1-1/2 year low of $2,562 per metric ton in September of 2010 on the prospects for an abundant Ivory Coast cocoa crop and on the hike by the International Cocoa Organization of its global cocoa surplus estimate for the 2010/11 season to 100,000 MT. Cocoa prices recovered into the end of the year, but still finished 2010 down 13.5% at $3,035 per metric ton. Cocoa prices rallied sharply in early 2011 as the presidential election in the Ivory Coast in November 2010 was disputed and disrupted cocoa exports from the Ivory Coast, a key cocoa supplier. Cocoa prices rallied to a 32-year nearest-futures high of $3,726 per metric ton in February of 2011 when the Ivory Coast’s President-elect banned exports for a month starting in January and extended the export ban into March of 2011as the disputed outcome of the November presidential election continued. The market was also concerned that stockpiled Ivory Coast cocoa beans from the export ban would quickly go bad in hot and humid Ivory Coast warehouses. The record high for cocoa futures is $5379.2 per metric ton posted in July 1977.

Supply – The world production of cocoa beans in the 2010-11 crop year fell -6.8% to 3.938 million metric tons. The world’s largest cocoa producer by far is the Ivory Coast with 33.6% of total world production in 2010-11. The Ivory Coast’s production in 2010-11, rose +8.3% yr/yr. After the Ivory Coast the major producers are Ghana with 21.0% of total world production in 2010-11, Indonesia with 12.7%, Nigeria with 6.1%, Cameroon with 5.6%, and Brazil with 4.8%. Closing stocks of cocoa in the 2010-11 crop year rose +7.2% yr/yr to 1.763 metric tons.

Demand – World seasonal grindings of cocoa in 2010-11 rose by +2.8% y/y to 3.780 million metric tons, a new record high. European is by far the largest global consumer of cocoa, consuming about 37.1% of the global crop.

Trade – U.S. imports of cocoa and cocoa products in 2010 (annualized through November) rose +4.5% yr/yr to 1.222 million metric tons, but still below the record high of 1.317 million metric tons in 2005.

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here

Related Links

World Production Calendar

World Production Maps

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