Cocoa, Dairy & Vanilla Markets
In this season, a total of 4.69 million metric tonnes (mt) of cocoa beans should be harvested, which would lead to surpluses of 1.78 million mt at the beginning of 2017/18 harvest. About 75% of the global output comes from Africa, with as much as 61% from the Côte d’Ivoire (1.9 million mt) and Ghana (950,000 mt). To support their own economy more and more cocoa beans are being processed into cocoa powder, butter, etc. in the countries of origin. The processing figures in the producing countries should rise by 109,000 mt to 1.91 million mt. In contrast, the processing figures in importing regions (North America, Europe, etc.) will probably only rise by 25,000 mt to 2.35 million mt.
This means greater volatility to prices. Market players consider the strong presence of African countries on the cocoa market a risk. The situation is comparable to the quasi-monopoly of Turkey on the hazelnut market: If international trade depends on only a few producing countries, factors such as a poor crop or political unrest can have much more serious effects on prices.
Mid-October prices of around 2,100 USD/mt indicate the market has been relatively stable this calendar year and down from last year’s highs of ca 3,000 USD/mt.
UK Dairy Market
It’s no secret to butter buyers – prices are rocketing.
The wholesale price of butter has increased from around £3,500 a tonne last summer to over £6,000 a tonne this September. This is a Europe wide phenomenon, with markets on the continent facing similar price hikes. Essentially, lower production this year has coincided with an increasing use of butter in the home and in manufacturing, as consumers become more particular about ingredients.
The link between butter and cardiovascular disease has also been weakened through recent studies and bad publicity around some vegetable oil-based spreads has also prompted consumers to switch back to butter. There’s probably a “Bake-Off” factor behind demand, at least in the UK, too.
So, strap yourself in, the market is going higher and a return to last summer’s levels is a distant hope.
Plain Vanilla, it ain’t
So what has happened to the wholesale Vanilla price this year, madness!?
It all started in March this year with Cyclone Enawo, the strongest to hit Madagascar since 2004, packing winds of over 160 mph and causing devastation over much of the island.
In 2015, Madagascar produced just under half of the world’s 8,300 tonnes of vanilla, according to UN sources. So, with the cyclone estimated to have destroyed around a third of the crop, the impact on global supply was massive. Within weeks, prices surged from levels below $100 per kg to over $500 per kg and have remained high, awaiting the next crop and partly due to reduced stock levels.
On the plus side, dirt poor farmers in Madagascar can now think about investing in more substantial homes and producers can expect price levels to drift downwards as additional tonnage comes on to the market from the next harvests.
Do please confer with me or Jacky for any clarification.