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The situation in the Ivory Coast continues to worsen and the prospect of all out Civil War gets closer by the day. The two factions continue to claim that they are legitimate, but violence, looting and the steady flow of refugees out of the country continues unabated. Consequently the market has continued to increase to levels last seen in 1979. Interestingly the fundamentals continue to be the most positive that they have been for some years, with the latest estimates of the 2010/11 Global surplus hitting 119,000tonnes. Obviously this forecast makes a lot of assumptions about crop size which, given that the Ivory Coast is the world's largest producer is hard to do given the political situation.

With no sign of either side standing down, it seems inevitable that war will start and then we could see the market spiralling up above the £3000 level in a very short time.

The Cocoa Powder situation remains critical and below is a précis of the factors from our key suppliers

Cocoa Futures Prices

What can we say about cocoa prices? Well to coin cliché, there's good news and there's bad news. The good news is that there is bumper crop coming off the trees this season with the key crops in Africa running significantly ahead of last year. As a result the market is expecting a significant surplus of perhaps 200,000 MT. In a normal season we could expect such a surplus to lead to lower prices. However, the bad news is that this is not a normal season. The recent elections in Ivory Coast have not produced a clear winner and both Presidential candidates now claim victory. As a result all exports from the Ivory Coast have ceased and the country's banking system has all but stopped functioning. With the Ivory Coast producing more than a third  of the world's cocoa the market is rightly concerned. In the last month prices have risen relentlessly as speculators and funds have chased prices higher.  

Cocoa Powder Prices

Unfortunately for cocoa powder buyers there is bad news and  there is more bad news. High bean prices clearly feed into high powder prices. However that is not the only problem. For the last few years powder demand has been growing on the back of growth in powder based consumption in the rapidly expanding  markets of the developing world.  At the same time the chocolate markets which drive cocoa butter consumption and are mostly in the west, have stagnated. Therefore much more of the cost of the bean has been priced into the powder. As if that wasn't enough one of the major players has had a serious fire at the start of this year further restricting availability. Prices have rocketed to record levels and some premium grades are already sold out for 2011.


In general terms the issue is actually securing supplies of products. Short availability across Sugar, Starches, Glucose and Dairy Products means that prices continue to rise and traditional market dynamics have been overtaken by the simple question of whether supply can be guaranteed. Company's do not have a business unless they can secure the supply of Ingredients reliably and ultimately make a margin on their finished products.



Much as last month, Sterling has settled and despite mixed but mainly negative UK economic news, has traded within a relatively narrow range against the Euro and US$ during February.

Tony Mycock 2.3.11



HB Ingredients
Cocoa House, 15, The Cliffe Industrial Estate, Lewes, East Sussex. BN8 6JL.
Sales order hot-line:+44(0)844 32 44 499
Enquiries:+44(0)845 88 00 799 Fax:+44(0)845 88 00 833