Asian cocoa prices up due to currency, supply

Asian cocoa prices up due to currency, supply

KUALA LUMPUR (Reuters): Cocoa prices remained firm in Malaysia
and Indonesia yesterday, with tight supply and weaker currencies
prompting gains, regional traders said.

Asian cocoa prices were higher despite falls in the New York
market on Tuesday, they said.

"I think production will be less towards the end of the year.
This is mainly due to the dry weather and the El Nino effect," an
official at the Malaysia Cocoa Board said.

"We estimate output to be around 107,000 tons for this year,"
he said. In 1996, Malaysia produced 122,000 tons of cocoa.

A drought induced by the El Nino weather phenomenon has
destroyed most of Malaysia's mid-crop between October and
December, leaving virtually no cocoa beans to harvest in the
current period, traders said.

The industry source said the weather may return back to normal
in 1998 and output will probably increase to 120,000 tons. "We
hope rainfalls will be evenly spread across the main cocoa
growing areas of Tawau," the official added.

"Demand is good. Local grinders are finding it difficult in
getting cocoa beans supply. They have to depend on imported beans
from Indonesia, Papua New Guinea and some from Ivory Coast," he
added.

Traders said cocoa prices in Malaysia have also been kept high
by the weakness of the Malaysian ringgit against both the U.S.
dollar and sterling.

"I think cocoa prices in Malaysia were trading above 5,000
ringgit," said a trader in East Malaysian state of Sabah.

On Wednesday, the Malaysian Cocoa Board (MCB) quoted the SMC
1A grade out of Tawau at an average of 5,525 ringgit ($1,509) a
ton, up 307 ringgit from a week ago.

The SMC 1B grade from Tawau was priced an average of 5,475 a
ton, up 300 ringgit from a week ago.

Malaysia's ringgit was quoted at 3.6650 to the dollar on
Wednesday morning against 3.65 on late Tuesday.

"Although prices fell in New York, local prices are high
because of the rupiah factor," said an Indonesian trader from
Ujungpandang, capital of the key growing region of South
Sulawesi.

Traders said South Sulawesi was getting steady rainfall in the
aftermath of a severe drought linked to the El Nino weather
phenomenon, adding that flowering had begun in some parts.

"There are signs of flowering in some parts, but it is still
in the early stages," one Indonesian trader said.

"If rains are sustained, flowering will be more uniform in
January and February."

"The harvest should begin by April and hopefully peak between
July and September," he added.

Traders said arrivals of small-sized beans were rising but
that they were reluctant to purchase them.

"Unless we have an agreement with our (overseas) buyers,
players will not be keen on buying small-sized beans," one trader
said. "I have such an agreement, and am buying in small
quantities."