Cocoa Dec '19 (CCZ19)
|Tick Size||$1.00 per metric tonne ($10.00 per contract)|
|Contract Size||10 metric tonnes (22,046 pounds)|
|Trading 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 Intercontinental Exchange (ICE) and on the London International Financial Futures and Options Exchange (LIFFE). 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) posted the low for 2018 in January at $1,836 per metric ton on tepid demand after North American Q4 cocoa grindings unexpectedly fell -1.3% yr/yr, weaker than expectations of a +2.5% yr/yr increase and after Asia Q4 cocoa grindings rose +4.2% yr/yr, below expectations of +8% yr/yr. Cocoa prices then rallied sharply into mid-year and posted a 2-1/4 year high of $2,914 per metric ton in May 2018 as production fell and demand picked up. The International Cocoa Organization (ICCO) forecasted that global 2017/18 cocoa production would fall -2.3% yr/yr to 4.64 MMT and that the 2017/18 global surplus would shrink to +22,000 MT from a +296,000 MT surplus in 2016/17. Global cocoa demand climbed as European Q1 cocoa grindings rose +5.5% yr/yr to a record for the quarter at 358,432 MT and Asian Q1 cocoa grindings rose +7.2% to a record for the quarter at 190,244 MT (data since 2001). Cocoa prices fell back into October as favorable weather in West Africa improved the outlook for the cocoa crops of the Ivory Coast and Ghana, the world's two largest cocoa producers. Also, Barry Callebaut, the world's largest cocoa processor, forecasted a balanced global cocoa market into 2019. Cocoa prices climbed into year-end on signs of tighter supplies after ICE-monitored cocoa inventories fell to a 2-year low in December. Cocoa prices finished 2018 sharply higher by +28% yr/yr at $2,416 per metric ton.
Supply - The world production of cocoa beans in the 2017/18 crop year rose by +11.5% yr/yr to 5.201 million metric tons. The world's largest cocoa producer by far is the Ivory Coast with 39.1% of total world production in 2017/18 with 2.034 million metric tons. After the Ivory Coast the major producers are Ghana with 17.0% of total world production in 2017/18, Indonesia with 12.7%, Nigeria with 6.3%, Cameroon with 5.7%, Brazil with 4.5%, and Ecuador with 4.0%. Closing stocks of cocoa in the 2017/18 crop year rose +1/3% yr/yr to 1.748 metric tons.
Demand - World seasonal grindings of cocoa in 2017/18 rose +3.9% yr/yr to 4.570 million metric tons, a new record high. The European Union is by far the largest global consumer of cocoa, consuming about 34.4 of the global crop.
Trade - U.S. imports of cocoa and cocoa products in 2018 (annualized through November) fell -5.1% yr/yr to 1.382 million metric tons, down from the 2017 record high of 1.456.
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