Cocoa futures rallied in New York and London amid signs of weak forward sales from producing countries in West Africa that have been slammed by deteriorating crops.
Even as heavy rains that wrought havoc on cocoa farms across West Africa have finally subsided, crop development continues to be very poor. Reports of swollen-shoot disease in top grower Ivory Coast and a shortage of fertilizers in the second-largest producer, Ghana, are among key concerns.
“Trees have not recovered as expected,” said Marex co-head of agriculture Jonathan Parkman, noting more research is needed to understand why the trees haven’t recovered better after the end of the rains.
Forward sales are also getting hit by confusion over new European deforestation regulations, Parkman said. Some sellers are afraid of getting hit with penalties if they can’t prove their beans come from a deforestation-free area.
Europe’s efforts to enforce its climate doctrine on other countries are inevitably going to have unintended consequences. That’s particularly true for agriculture producers where producers don’t have the resources to produce according to extraterritorial rules. The commonality across crops where these kinds of rules are threatening to be enforced suggests cocoa is not an isolated incident.Click HERE to subscribe to Fuller Treacy Money Back to top