Cocoa Sep '22 (CCU22)
|Tick Size||$1.00 per metric tonne ($10.00 per contract)|
|Contract Size||10 metric tonnes (22,046 pounds)|
|Months||Mar, May, Jul, Sep, Dec (H, K, N, U, Z)|
|Trading Hours||3:45a.m. - 12:30p.m. (Settles 10:50a.m.) CST|
|Value of One Futures Unit||$10|
|Value of One Options Unit||$10|
|Last Trading Day||Eleven business days prior to last business day of delivery month|
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 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. and ICE Futures Europe exchanges. 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 - ICE cocoa futures prices (Barchart.com symbol CC) drifted lower in Q1-2019 and sank to a 2-year low in March at $1,901 per metric ton on signs of rising global cocoa supplies. The International Cocoa Organization (ICCO) in late February 2019 forecast a global 2018/19 cocoa surplus of +39,000 MT, expanding from a global 2017/18 cocoa surplus of +8,000 MT. Strong global cocoa demand, however, pushed cocoa prices higher into Q2-2019 after Asian cocoa processing in Q1 surged +9.5% yr/yr to a record 208,388 MT, the highest for a Q1 since data began in 2011. Also, European cocoa processing in Q1-2019 rose +3.3% y/y to 370,359 MT, the highest for a first-quarter since data began in 2011. However, cocoa prices fell back slightly in July 2019 as the mid-year rally in prices undercut cocoa demand and European cocoa processing in Q2-2019 unexpectedly fell -3.2% yr/yr, the first decline since 2016. Cocoa prices then rallied sharply into November 2019 when they posted a 1-1/2 year high at $2,783 per metric ton as crop concerns in Ghana prompted the ICCO to reverse its estimate for a global 2018/19 cocoa surplus to a global cocoa deficit of -21,000 MT for 2018/19. Robust Asian cocoa demand also underpinned cocoa prices after Asian cocoa processing in Q3-2019 jumped by +14.7% yr/yr to 223,356 MT, a record for a Q3. Cocoa prices finished 2019 higher by +5% yr/yr at $2,540 per metric ton.
Supply - The world production of cocoa beans in the 2019/20 crop year is expected to rise +1.7% to 4.824 million metric tons, after the +2.0% increase seen in 2018/19 to 4.747 million metric tons. The world's largest cocoa producer by far is the Ivory Coast, followed by Ghana and Nigeria. Closing stocks of cocoa in the 2019/20 crop year are expected to fall -5.3% yr/yr to 1.530 million metric tons, after the -6.2% decline seen in 2018/19 to 1.615 million metric tons.
Demand - World seasonal grindings of cocoa in 2019/20 are expected to rise +1.2% yr/yr to 4.861 million metric tons, a new record high. The European Union is by far the largest global consumer of cocoa, consuming about 32.1% of the global crop.
Trade - U.S. imports of cocoa and cocoa products in 2019 rose by +1.6% yr/yr to 1.397 million metric tons, still below the 2017 record high of 1.456 million metric tons.
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