Cocoa prices steady in Malaysia

Cocoa prices steady in Malaysia

KUALA LUMPUR (Reuters): Cocoa prices remained firm in Malaysia and Indonesia yesterday, with supply remaining tight amid dry weather conditions in key growing areas, traders said.

Firmer cocoa futures in New York on Tuesday also supported prices, they said.

"The dry weather has been the contributing factor to the very low yield. There's hardly any crop," said a cocoa grower in Tawau, Malaysia's key cocoa-growing region in the eastern state of Sabah.

A drought induced by the El Nino weather pattern 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.

Growers said the drought had also delayed the new crop.

"Flowering has only just started instead of the normal September-October period," the grower in Tawau said.

An official of the Malaysian Cocoa Board has said he expects a 40 to 50 percent fall in this year's production compared to last year's 120,000 tons.

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.

The dollar has gained 32 percent and the sterling 36 percent in value against the ringgit since early July.

On Wednesday, the Malaysian Cocoa Board (MCB) quoted the SMC 1A grade out of Tawau at an average of 4,940 ringgit ($1,497) a ton, up 139 ringgit from a week ago.

The SMC 1B grade from Tawau was priced at an average of 4,850 a ton, up 94 ringgit from a week ago.

In Indonesia, dry weather conditions also prevailed in the key growing region of South Sulawesi, traders said.

"There have been brief, scattered showers in some parts but nothing meaningful," one trader from the region's provincial capital Ujung Pandang said.

Traders said 1998 production remained under a cloud due to a severe drought linked to the El Nino weather pattern sweeping across the Indonesian archipelago.

"I see production declining sharply next year if there is no rain over the next two months," one trader said. "There could also possibly be a delay in next year's harvest."

Traders said bean size was smaller because of the drought, adding that they were getting an average of 130 beans per 100 grams, while the acceptable standard was 110 beans.

"There are plenty of small-sized beans coming into the market, and this could pose problems with foreign buyers," one trader said. "They (buyers) might want lower prices."

Traders said fair, average quality beans were quoted at 5,200- 5,250 rupiah/kg at Ujung Pandang, unchanged from a week ago.