Cocoa

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Cocoa is a soft commodity traded at the Intercontinental Exchange at its ICE U.S. division and in Europe at its NYSE Liffe division. [1] [2] It is the main ingredient in chocolate.

CME Group also lists cocoa futures on its NYMEX division, though very little is traded on the venue.[3]

Both CME Group and ICE plan to list new euro-denominated cocoa futures on March 30, 2015. The CME contracts will be physically delivered and the exchange will also offer a corresponding contract denominated in dollars, which is settled in cash. [4]

Also see: ICE Cocoa

World Cocoa Sources

Cocoa is made from cacao beans, most of which (about 70 percent) come from West Africa, where Ghana, the Ivory Coast and Nigeria are the largest producers. Other growing regions are Asia, Central America, and South America (all within 20 degrees of the equator).[5] [6] Because so much of it comes from one region, cocoa is subject to high levels of volatility.

Cocoa in the News

  • In June 2014, CME Group announced it will launch a London-based cocoa contract by early 2015 in a direct challenge to Intercontinental Exchange.[7] CME Group said it aims to engage client support for its contract by offering so-called "participation credits," which will return money to participants depending on the success of the contract. CME will also offer its usual incentives to market-makers.[8]
  • When ICE completed its purchase of NYSE Euronext in November 2013, it became the dominant player in in the global trading of soft commodities, as it acquired the lion’s share of the world’s sugar, coffee and cocoa derivatives trade.[9] For more on the ICE/NYSE softs story, visit John Lothian News.
  • In the summer of 2010, Anthony Ward, from the London-based commodities hedge fund Armajaro Holdings, took delivery on 241,000 tons of cocoa beans. After the biggest delivery in 14 years, market participants worried about a bullish cocoa market. Jürgen Steinemann, the chief executive officer of the chocolatier supplier Barry Callebaut, told the Financial Times that there is no fundamental reason cocoa prices will fall. He explained that cocoa is a scarce material and that demand has risen and supply has been stable. While making it clear that Armajaro is a respected player, Steinemann believes hedge funds are to blame for the increasing cocoa prices and that speculators have been present in these markets for over five years. [10]

Resources

References

  1. ICE Product Guide: Cocoa Futures. ICE.
  2. NYSE Liffe Cocoa Futures. NYSE Euronext.
  3. NYMEX Cocoa. CME Group.
  4. CME and ICE to go head to head with new cocoa contracts. The Financial Times.
  5. Cacao History. Xan Confections.
  6. Cocoa Farming: Fast Facts. World Cocoa Foundation.
  7. CME confirms cocoa contract plan, EU wheat ambitions. Reuters.
  8. CME plans new incentive for cocoa launch. FOW.
  9. With NYSE Deal, ICE Assumes Bulk Of Global Softs Trade. John Lothian News.
  10. Chocolatier sees cocoa prices staying high. FT.