Cocoa prices decline. (Good news for chocolate lovers !)
Wall Street Journal
COMMODITIES
Prospect of Ivory Coast Truce Leads to Cocoa Price Plunge
By CLAIRE GRIERSON
OsterDowJones Commodity News
NEW YORK -- Cocoa prices sank on the Coffee, Sugar and Cocoa
Exchange as news of a possible truce in Ivory Coast, the world's largest
cocoa producer, sparked a heavy selloff.
Rebels may be ready to sign a cease-fire agreement following the
liberation by the Ivorian government of Daloa, a southwestern town in
the heart of the cocoa belt and which had been under rebel control since
Sunday.
President Laurent Gbagbo's administration has been attempting to quash
the rebels, who have taken a large part of the country since an attempted
coup Sept. 19.
The December contract fell $86 to $2,212 a metric ton, having shed
$113 at one stage, with more than half the day's losses occurring in the
final minute of the session.
"The market is giving up its war premium," said Luis A. Rangel, vice
president with brokerage firm Fimat USA Inc. in New York.
Since the uprising in the Ivory Coast began, December cocoa futures
have been rallying, extending an existing 13-month bull run, analysts
said.
Prices hit a new 17-year high of $2,405 a metric ton on Oct. 11, a $315
climb since the failed coup in that nation.
Ivory Coast accounts for 40% of the world cocoa supply and with the
country's main crop harvest season just beginning, the uprising has
caused concerns that the flow of cocoa from the nation could be
disrupted.
In the past two days, as tensions in the Ivory Coast eased, the market
has started to retrace.
Boyd Cruel, senior soft commodities analyst at brokerage firm Alaron
Trading Corp. in Chicago, said the market has been extremely
overbought since the coup began.
"We've built in over 300 points of tension premium on the Ivory Coast
and with the possibility of a cease-fire, the market's giving it back," he
said.
The selloff was driven largely by speculators and by commercial
participants who were dumping futures they had bought when Ivorian
political tensions were most fraught.
The activation of sell-stops -- preplaced orders to sell futures when the
market hits a certain level -- accelerated the pullback in prices.
One physical cocoa trader said the easing of tensions in Ivory Coast was taken as a signal by some market
participants that the threat to exports has been partially relieved.
Traders said cocoa beans and financing within Ivory Coast appear to be moving easily, and in addition the port
cities of San Pedro and Abidjan were operating "business as usual."
Analysts, though, cautioned that with the political situation so volatile, another flare-up in tensions easily could
add back the premiums.
In other commodity markets:
WHEAT: Chicago Board of Trade futures soared again, on heavy buying from speculative funds. The rally
followed a limit gain Tuesday after news that Egypt had bought a large quantity of U.S. soft wheat, the kind
traded at the CBOT. The December future rose 15 cents to $4.0825 a bushel.
COFFEE: Arabica coffee futures fell on the Coffee, Sugar & Cocoa Exchange as forecasts of rain in Brazil
alleviated concerns that recent hot, dry weather would damage the flowering crop. The December future fell
2.60 cents to 67.10 cents a pound.
Write to Claire Grierson at cgrierson@osterdowjones.com
Updated October 16, 2002 9:24 p.m. EDT
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