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.