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Commodity and Currency Reports


Period September November 2009

Cocoa Market

During the last quarter Cocoa Prices increased above the £2000 level hitting 28 year highs, peaking at a high of around £2200. There are normally sound reasons as to why the market is up at these levels, usually it is a combination of fundamental fact and fiction, but Speculators have entered commodity markets in force over the past year or so and this is causing skewing and pushing them all to higher than anticipated levels.

Fundamentals are, of course, basic supply and demand. Over the past three years or so, there has been an overall crop deficit with grind outstripping bean production. However these shortfalls have not been too damaging, but have remained significant. 2008/2009 was a very poor crop year in the main Cocoa growing African states, but since the new crop started arriving at ports from 1st October for the 2009/2010 season and with these improved arrivals at the main ports this would, under normal circumstances, lead to the market easing down. Couple this with reduced grindings and consumption and it is hard to see why the market should stay so high although also the rumour mill is pointing to poor quality beans, but this is not yet becoming widely apparent.

But as a result, high cocoa content Chocolate prices are at high levels both spot and forward and with a continuing surplus of Cocoa Butter helping White and Milk chocolate to stay at fairly steady levels, we are seeing price parity between the 3 types for the first time in some years. The Cocoa Butter surplus is also keeping Cocoa Powder prices at very high levels and this is expected to stay during 2010 even if and when the Cocoa Market eases back.

Dairy Market

Again since the summer Dairy prices have been steadily moving upwards and this is expected to be the case certainly for at least the first quarter of 2010. The squeeze has been due to limited milk supply, back in September the French and Belgian farmers led a protest at uneconomically low liquid milk prices by pouring milk on the land rather than selling it. Prices have since improved for them but the wider market remains high with supply tight. Whey Powder has stabilised at a high level with cheese production lower than expected again due to tight liquid milk supply. So process of Skimmed Milk Powder and Whole Milk Powder are trading around 25-30% higher than summer levels.


Sterling climbed up to around Euro1.19 = £1 during the summer, however during September and October declined at a fairly steady rate by around 10% to below Euro1.07. We now seem to be within a range of Euro1.09-1.11 and at this level probably through into 2010. Obviously this plays havoc with imported Euro or US$ based ingredients but the upside is that UK manufacturers have become low cost producers with rosier export opportunities and also more immunity to low cost imports of foreign made food & confectionery products.

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HB Ingredients
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Uckfield East Sussex. TN22 1QL.
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