Southeast Asian cocoa prices fall, supply seen tight

Southeast Asian cocoa prices fall, supply seen tight

KUALA LUMPUR (Reuters): Southeast Asian cocoa prices fell
sharply this week on strong regional currencies despite firmer
New York prices Tuesday due to fund buying.

"Before Chinese New Year, prices were hovering at around 6,500
ringgit level, but fell sharply since Monday following sharp
appreciation of the ringgit against sterling and the dollar,"
said an industry source in the Malaysian state of Sabah.

The Malaysian ringgit rose to 3.93 to the U.S. dollar from
4.50 early last week, and to 6.64 to the sterling against 7.50.
The Indonesian rupiah strengthened to 9,500 a dollar from 11,500
a week ago.

"We are still monitoring the rupiah movement. Prices once
reached a record of Rp 14,500 because of a weaker rupiah," said
an Indonesia trader in Ujungpandang, the provincial capital of
the key growing area of South Sulawesi.

Indonesian traders said prices for fair, average quality cocoa
beans, were quoted at Rp 10,000-Rp 11,000/kg compared with Rp
14,000/kg last week.

On Wednesday, the Malaysian Cocoa Board (MCB) quoted the SMC
1A grade out of Tawau at an average of 5,750 ringgit ($1,466) a
ton, down 775 ringgit from a week ago.

The SMC 1B grade from Tawau was priced an average of 5,638
ringgit a ton, down 812 ringgit.

"Cocoa producers reckoned that prices of 5,000 ringgit will
augur well in the (Malaysian) cocoa industry," the source added.
Industry sources in Malaysia and Indonesia expect a shortfall in
supply due to a severe drought linked to the El Nio weather
phenomenon.

"Although El Nio has caused low production in the region,
cocoa prices still fell because of the ringgit's strength," said
the Malaysian source.

"Cocoa pods are affected by dry season, so farmers hope for
heavy rainfalls. If not, crops would be affected," the source
said. "If there are no rainfalls for two to three weeks, we may
see a drop of around 40 percent in production."

Halim Razak, deputy chairman of the South Sulawesi chapter of
the Indonesian Cocoa Association, said only 4,000 to 5,000 tons
of cocoa arrived in January in Ujungpandang from the various
growing areas compared with about 6,000 to 7,000 tons in the same
period last year.

"The reason behind the decline is that trees do not produce
many beans because of the dry period in the wake of the El Nio
last year. In addition, beans being harvested are only remains of
the mid-crop," he said by telephone from Ujungpandang.

Razak also said he believed cocoa arrivals would fall to
between 3,000 and 4,000 tons in February compared with 4,000 and
5,000 tons at the same period last year.

But Razak believed arrivals would rise again starting in March
and April because of the main crop harvest.