MONTHLY COCOA MARKET REPORT. August 2014

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Robert Henry
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1 MONTHLY COCOA MARKET REPORT August 2014

2 Important Notification The information provided is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject BARRY CALLEBAUT or any of its affiliates to any registration requirements relating to such distribution or use. The information and opinions provided on this report have been obtained from and based on sources believed to be reliable. BARRY CALLEBAUT do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates herein reflect our judgement on the date of this report and are subject to change without notice. The information and opinion contained in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. From time to time, BARRY CALLEBAUT, its affiliates or the principals or employees of such firm or affiliates may have a position in the investments referred to herein or hold options, warrants or rights to such investments, maintain a commercial relationship, or provide investment banking or consulting services to or serve as a director of a company being reported on herein. This publication must not be copied or distributed to other persons without the prior written consent of BARRY CALLEBAUT. DISCLAIMER SLIDE n 2

3 I. TERMINAL MARKETS II. THE SUPPLY III. THE DEMAND IV. ICCO S&D

Et voilà, London closed the month above the psychological threshold of 2 000 GBP/mt.

4 Et voilà, London closed the month above the psychological threshold of GBP/mt. Contrariwise, the ICCO increased its forecasted stocks by 95tmt to 1 660tmt (end of Sep14). MARKETS SLIDE n 4

5 LIFFE stocks at 135tmt (including 68tmt with valid certificates) = -0.2% vs. 2 weeks ago = -2.6% vs. 1 year ago MARKETS SLIDE n 5

6 New York s ICE was slightly less supported thanks to a strong USD (9-month high against the EUR and 6-month high against the GBP) in the light of positive macros (highest US housing figures in 8 months). MARKETS SLIDE n 6

7 ICE stocks at 288tmt (including 13tmt of valid certificates) = -2.7% vs. 2 weeks ago = -5.4% vs. 1 year ago MARKETS SLIDE n 7

8 Since May14, the net combined specs position has gradually increased and is now of 170k lots (28k lower than Dec13 record). It is the equivalent of an Ivorian crop or 26% of the Open Interest. MARKETS SLIDE n 8

9 Even if Ivory Coast and Ghana sold half a million more beans than last year (13/14 spot and 14/15 forward), the industry cover is only on par with last year (with 5.2 months, up to the end of Aug14). MARKETS SLIDE n 9

10 I. TERMINAL MARKETS II. THE SUPPLY III. THE DEMAND IV. ICCO S&D

11 Over the past month, the ICCO has released a new quarterly bulletin. They increased their 11/12 crop by 10tmt, their 12/13 crop by 13tmt and their 13/14 crop by as much as 182tmt. Cocoa bean crops by origin country: ICCO figures over the past 4 seasons IN THOUSANDS METRIC TONNES IVORY COAST GHANA INDONESIA CAMEROON NIGERIA BRAZIL ECUADOR ICCO 10/11 DATA ICCO 11/12 DATA ICCO 12/13 ESTIMATE ICCO 13/14 FORECAST WORLD CROP % -5.0% -3.7% +10.2% SUPPLY SLIDE n 11

12 Up to the end of Aug14, we are estimating Ivorian arrivals at 1 726tmt. It is 347tmt or 25% above last year. For the record, it is also 23tmt below Reuters current estimate from exporters. SUPPLY SLIDE n 12

13 Indeed, thanks to record rainfalls in Nov-Dec13 (51% above the 30-year average), the May-Sep14 mid crop is the highest ever registered. Since Jan14, rainfalls have remained plentiful... SUPPLY SLIDE n 13

14 ... (28% above normal and actually a maximum cumulated level) but have recently normalized (avoiding any major Black-Pod spread). This is promising for next year s Oct14-Apr15 main crop. SUPPLY SLIDE n 14

15 In Ghana, the Cocobod did not declare any light crop purchases yet. But some very low figures are rumored and it would make sense in the light of our significant May-Sep14 smuggling estimate (50tmt). SUPPLY SLIDE n 15

16 I. TERMINAL MARKETS II. THE SUPPLY III. THE DEMAND IV. ICCO S&D

17 Over the past month, the ICCO has also adjusted upward its grinding figures: by 15tmt for 11/12, 28tmt for 12/13 and 67tmt for 13/14. But one should note that slowdowns are rumored. Cocoa bean grinds by consuming region: ICCO figures over the past 4 seasons IN THOUSANDS METRIC TONNES ICCO 10/11 DATA ICCO 11/12 DATA ICCO 12/13 ESTIMATE ICCO 13/14 FORECAST WESTERN EUROPE EASTERN EUROPE AMERICA AFRICA ASIA & OCEANIA WORLD TOTAL % +0.9% +3.5% +3.7% DEMAND SLIDE n 17

18 Below is a reminder on Q official grinds (released mid Jul14). Q3 will be released mid Oct14 and if there is no slowdown all official grinds (without Indonesia) would only be flat year-on-year. Region (source) = figure in mt = % versus Q2 2013: Western Europe (ECA) = mt = -0.7% Germany (BDSI) = mt = +9.1% NAFTA (NCA) = mt = +4.5% Brazil (CAB) = mt = +5.9% Asia (CAA) = mt = +5.2% Malaysia (MCB) = mt = -9.9% DEMAND SLIDE n 18

19 But with the rest of the world increasing by 10% (mostly Indonesia and West Africa), it would lead to a total Q3 increase of 2.9% and a total 13/14 season near to the optimistic ICCO estimate of 3.7%. DEMAND SLIDE n 19

20 Since Oct13, the combined ratio lost 60 points. The drop has recently accelerated since the butter decrease was not compensated by the powder increase (actually quoted higher, but not often booked). DEMAND SLIDE n 20

21 I. TERMINAL MARKETS II. THE SUPPLY III. THE DEMAND IV. ICCO S&D

22 All in all, the ICCO adjusted its S&Ds over the past 3 years. 11/12 surplus decreased by 5tmt to 82tmt. 12/13 deficit increased by 15tmt to 208tmt. 13/14 from a deficit of 75tmt to a surplus of 40tmt. S&Ds and evolution of stocks: ICCO figures over the past 4 seasons IN THOUSANDS METRIC TONNES ICCO 10/11 DATA ICCO 11/12 DATA ICCO 12/13 ESTIMATE ICCO 13/14 FORECAST SURPLUS/DEFICIT END-OF-SEASON STOCKS STOCK/GRINDING RATIO 44.3% 46.0% 39.4% 38.9% S&D SLIDE n 22

23 We removed the structural deficit from our bullish column. Indeed, with the improved supply trend (mostly from Ivory Coast and Ghana, in 10/11 and 13/14), the gap is much less obvious. Bullish factors: Bearish factors: Industry cover of 5.2 months (Aug14) 13/14 surplus of 40tmt (forecast) Ebola virus (what if stories ) Low pressing margins (slowdown) Inversed structure (LIFFE & ICE) Record rains, good crop prospects Holding diffs (on secondary market) Strong USD (macros), weak CRB El Niño story loosing momentum Weakening diffs (on primary market) S&D SLIDE n 23

24 QUESTIONS & ANSWERS DO NOT HESITATE TO CONTACT YOUR SALES REPRESENTATIVE August 2014

LONDON COCOA FUTURES CONTRACT CHANGES EFFECTIVE FROM MAY 2017 TOBY BRANDON, DIRECTOR, SOFT COMMODITIES, ICE FUTURES EUROPE

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