Delivery Against Cocoa Futures ICE and NYSE Liffe

Transcription

1 Delivery Against Cocoa Futures ICE and NYSE Liffe Robin Dand Abidjan February 2014 Delivery Against Futures Position Not Usual Positions held on Futures contracts involving delivery may be satisfied by either; Trading out of position before delivery required, or Delivery Cocoa Delivered v Futures on ICE and NYSE Liffe (tonnes) 2013 Total Deliveries 2% Delivery is unusual but the 2% keeps the price of the 98% relevant Total Futures 98% 1

2 The Use of the Futures Market in Pricing Physical Market Cocoa Factors Affecting Price of Cocoa quoted on Exchanges Location; must be at ICE Certain ports on Eastern Seaboard of USA NYSE Liffe Certain ports in Northern Europe Storage conditions; with certain Warehousekeepers; in certain Warehouses; and subject to certain storage and administrative requirements Weight of what is to be delivered subject to tolerances Origin Some are valued higher than others Quality Must meet certain minimum requirements Supply and Demand Note that these affect the price quoted on the Exchanges 2

3 Exchange Deliverable Cocoa Beans Must be cocoa beans which are: 1. Stored in specified Ports, and are; With nominated/licensed warehousekeepers; In their nominated/licensed warehouses; Stored according to the Exchanges criteria; and 2. Of a minimum quality standard, specified by the relevant exchange; and 3. Comply with the relevant Exchange s delivery mechanism ICE NYSE Liffe ecops NYSE Liffe Guardian Delivery Locations The ICE Exchange Warehousekeepers Warehouses Port of New York District 2 5 Delaware River Port District 3 20 Port of Hampton Roads 1 1 Port of Albany - - Port of Baltimore 1 3 Total 7 29 NYSE Liffe Warehousekeepers Warehouses Amsterdam 7 49 Antwerp Bremen 2 10 Felixstowe - - Hamburg 6 30 Humberside 1 1 Le Havre 3 3 Liverpool 1 1 London 2 4 Rotterdam 3 27 Teesside - - Total

4 Weight Requirements The ICE Exchange 10 tonne Lots of cocoa beans in In bags, ±1.0% weight tolerance To be weighed before delivery NYSE Liffe 10 tonne Standard Delivery Units ( SDU ) In bags, ±1.5% weight tolerance 100 tonne Large Delivery Units ( LDU ) In bags, +1.5%, -1.0% weight tolerance 1,000 tonne Bulk Delivery Units ( BDU ) Bulk, +1.5%, -0.5% weight tolerance SDUs and LDUs Increasing discounts after 6 months from date of weighing, up to 3 years BDUs Weight valid for 6 months Origin Discounts and Premiums ICE Cocoa Contract NYSE Liffe Cocoa Contract Group A (+$160/mt) Main Crop for: Ghana, Ivory Coast, Lome, Nigeria and Sierra Leone Group B (+$80/mt) Arriba, Bahia, Cameroon, CCN, Chiapas, Columbia*, Costa Rica, Ghana Mid, Grenada, Guatemala, Hispaniolas, Honduras, Ivory Coast, Jamaica, Java, Liberia MC, Masie Nguema, New Guinea, New Hebrides, Nicaragua, Nigeria LC, Panama, Peru*, Salvador, Samoa, Sanchez, Sao Tomé, Sri Lanka, Surinam, Tabasco, Trinidad, Venezuela, Victoria and Zaire * from July 2015 Group C (Par) Bolivia, Haiti, Sulawesi, Malaysia, Para and all other origins Origin Group 1 (Par) Côte d Ivoire, DR of Congo, Equatorial Guinea, Ghana, Grenada fine estates, Jamaica, Nigeria, Cameroon, Sierra Leone, Togo, Trinidad & Tobago plantation and Western Samoa Origin Group 2 (- 25/mt) São Tomé & Principe and Sri Lanka Origin Group 3 (- 50/mt) Bahia Superior, Vitoria Superior, Ecuador and Papua New Guinea Origin Group 4 (- 75/mt) Malaysia Origin Group 5 (- 100/mt) All other origins Note all origins are allowed; premiums on (ICE), NYSE Liffe apply discounts 4

5 So is ICE Cocoa higher priced than NYSE Liffe s? Not usually E.g. Friday 14 th February the cocoa markets settled for May 2014 position at: NYSE Liffe ICE 1,855/mt $2,967/mt /$ rate so NYSE Liffe $ price $3,101/mt Difference to ICE is $134/mt Known as the arbitrage and is keenly followed by market participants Note that supply and demand for cocoa in the US market may be different to those in Europe Typical Broker Report Format COCOA MARKET REPORT Friday, February 14, 2014 Arb Settlement as of Ldn Close Source: Reuters, CQG, NYSE Liffe and I.C.E. NYSE Liffe VALUE GBP/USD ARB I.C.E. NY CLOSE HI LOW OPEN INTEREST VOLUME DATE USD GBP CLOSE HI LOW LAST VOL. OPEN INTEREST MAR ,867 1,854 71, /19/ MAR ,942 2,910 2, ,203 MAY ,861 1,848 66, /21/ MAY ,977 2,950 2,962 6, , JUL ,853 1,841 41, /16/ JUL ,983 2,962 2,967 1,565 34,303 1,958 SEP ,843 1,831 32, /17/ SEP ,980 2,958 2,969 1,337 18, DEC ,812 1,803 31, /17/ DEC ,968 2,946 2, , MAR ,799 1,789 36, /18/ MAR ,944 2,927 2, , MAY ,793 1,792 1, /20/ MAY ,939 2,939 2, ,110 1 JUL /15/ JUL SEP /16/ SEP DEC /16/ DEC London Due: MAY4-3 Lower 282,129 2,189 18,109 10, ,642-3,811 LDN VOLUMES ~ LONDON SPREADS ~ Stock Market Indices SUPPORT & RESISTANCE ICE TAS N.Y. VOLUMES ~ NEW YORK SPREADS ~ Final: 18,109 Switch Bid/Ask Hi Low Volume DJIA MAY4 Liffe I.C.E VOLUMES Final: 10,659 Switch Bid/Ask Hi Low Volume S rds: 3,498 H14/K14 5/ S&P rd Resist (Trade at Settlement) S rds: 3,269 H14/K14-33/ A'S: na H14/N14 12/ NASDAQ nd Resist A'S: 128 K14/N14-8/ EFS: na H14/U14 21/ FTSE st Resist MAR4 0 EFS: 0 K14/U14-10/ Calls: 14,087 H14/Z14 51/ NIKKEI Pivot MAY4 59 Calls: 1,798 K14/Z14 4/ Puts: 2,150 H14/H15 63/ Commodity Indices: 1st Sup JUL4 13 Puts: 3,166 K14/H15 25/ nd Mth Cont. K14/N14 7/ CCI nd Sup H14/K14 0 2nd Mth Cont. K14/K15 28/ LDN RSI K14/U14 17/ DJUBS rd Sup K14/N14 13 NY RSI N14/U14-2/ Day = K14/Z14 NYSE 46/47 47 Liffe GSCI Cable K14/U Day = N14/Z14 12/ Day = K14/H15 58/ TRJ CRB Weekly CMAA Spot Prices 07-Feb Day = ICE N14/H15 32/ STOCHASTIC K14/K15 62/68 Bltc Frt Idx Basis Eastern Seaboard, Ex-Dock STOCHASTIC N14/K15 35/39 %K = N14/U14 9/ mth USD 0.24 Basis: & MAR4 NYCC 2,922 %K = N14/N15 37/42 %D = N14/Z14 39/ LIBOR GBP 0.52 Main Cro Ghana $405 %D = U14/Z14 14/ MOVING AVE. N14/H15 52/ Rates EUR 0.26 Cro Ivor Coast $348 MOVING AVE. U14/H15 34/ Day = 1858 N14/K15 55/62 NY ATM Opt Vol Change ArbitrageMain Cro Ni erian $300 5-Day = 2951 U14/K15 36/41 10-Day = 1851 N14/N15 52/75 H Ecuador ASE $ Day = 2931 U14/N15 38/44 20-Day = 1816 U14/Z14 29/ K Sanchez f.a.. $ Day = 2880 U14/U15 38/46 50-Day = 1771 U14/H15 41/ LDN ATM Opt Vol Change Indonesian f.a.. $ Day = 2803 Z14/H15 20/ Day= 1747 U14/K15 44/51 H PPP Nat. African Cocoa Butter Day= 2755 H15/K15 1/ Day= 1661 U14/N15 41/64 K Cocoa Press Cake Day= 2559 K15/N15 2/ GBP LDN CLOSE EUR LDN CLOSE USD LDN CLOSE KEY RATES USD LDN CLOSE USD LDN CLOSE USD LDN CLOSE USD: USD: GBP: US Fed <.25 UD: MXP: BRZ: EUR: GBP: EUR: BOE 0.50 IND: DKK: RP: CHF: CHF: CHF: PBOC 6.00 SGD: SEK: CLP: JPY: JPY: JPY: ECB 0.25 MYR: NOK: VEB: CAN: CAN: CAN: Swiss NB 1.00 INR: VND: DOP: RUB: RUB: RUB: BOJ 0.10 CNY: PNG: XOF: I.C.E STOCKS in CERTIFIED WAREHOUSEs (~145 lb. BAGS) Date New York Delaware Hampton Roads Albany Baltimore TOTAL Net Chng. Valid Certs Passed Pending 14-Feb ,646 3,120,553 9, ,200 3,555,963 9, , Feb ,961 3,112,578 9, ,200 3,546,303 1, , LIFFE COCOA STOCKS - In Exchange Nominated Warehouses SDU 10 mts LDU 100 mts BDU mts Total Date Valid Exp Non-Tend Live Total Valid Exp Non-Tend Live Total Valid Exp Non-Tend Live Total Valid Exp Non-Tend Live ALL 3-Feb 6,678 2,011 1, , ,080 28,710 16,160 1, ,600 5

6 Overview of Quality Assessment Purpose of quality assessment is to ascertain two main factors; Yield; how much useable material is there? Flavour and wholesomeness Factors affecting Yield Similar sized big single whole beans are worth more than small ones, and beans of significant variable size Less non-cocoa yielding material is better Foreign matter Sievings Flat beans Less limited-cocoa yielding material is better Residue Clusters 6

7 Factors affecting Yield Sievings Sievings is the material that passes through the screen. NYSE Liffe refers to this being Residue, and use 6mm square holed wire screens rather than the physical market s use of 5mm round-holed plate screen Examples of Residue, Flat Beans, Bean Clusters and Foreign Matter Residue (Physical market definition - FCC) any cocoa element other than whole cocoa beans and flat beans Bean Clusters two or more beans joined together which cannot be separated by finger and thumb Flat Beans cocoa beans too thin to cut to give a complete surface of the cotyledons Foreign Matter any substance other than cocoa beans and residue 7

8 Yield Assessment NYSE Liffe Amount of sievings, residue (FCC) and foreign matter is weighed and compared to the weight of the sample Number of single whole beans per given weight assessed (the bean count) a proxy for the average size of the beans; and usually expressed as the number of beans per 100g Distribution of bean sizes in the sample, the homogeneity Sieves To Measure the Homogeneity of Bean Size 8

9 Yield Assessment NYSE Liffe Sievings (called Residue by NYSE Liffe) and Foreign Matter 25g to 75g/2kg allowed, at an allowance Clusters up to 150g/2kg allowed at half the discount for Sievings and Foreign Matter Bean Count premium for beans larger than 100beans/100g, discount if smaller than 100beans/100g to a maximum of 120beans/100g Homogeneity of bean size dependent on set number of beans passing through 13mm, 11.5mm and 10.5mm screens and subject to the standard deviation on their size, discounts from 26 to 40 standard deviations Flavour and Wholesomeness Assessment NYSE Liffe Flavour is subjective. Therefore the measurement assesses the factors that develop or spoil the flavour and, in extreme cases affect wholesomeness Assessed by the cut-test. 300 beans are cut in half to expose both cotyledons and a visual inspection occurs to find; Mould or infestation (factors affecting flavour and wholesomeness ) Slaty beans (measures the development of chocolate flavour) 9

10 Mould, Infestation and Slate 100 beans cut Ready for Analysis Note the good light conditions and the matt black background for inspection. Note also that a further 200-beans will need to be analysed an easier task with the Revelator and the use of the black Work Area grid. While the use of a knife to cut cocoa is possible, please note that the Work Areas will be damaged if used for this purpose. 10

11 Thank You! 11