Seventh Multi-year Expert Meeting on Commodities …unctad.org/meetings/en/Presentation/SUC MYEM2015 Jean...Seventh Multi-year Expert Meeting on Commodities and Development 15-16 April

Seventh Multi-year Expert Meeting on Commodities and Development

15-16 April 2015 Geneva

Latest developments in the global cocoa market

By

Jean-Marc Anga International Cocoa Organization

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.

International Cocoa Organization (ICCO) | April 2015

UNCTAD GLOBAL COMMODITIES FORUM Geneva, 15 April 2015

Latest developments in the global cocoa market

Daily QKCc1 21/09/2005 - 29/08/2014 (NYC)

VltyOHLC, QKCc1, Trade Price, 0.0, 10, 365.0

05/01/2010, 22.93

BarHL, QKCc1, Trade Price

05/01/2010, 142.70, 140.40, +2.45, (+1.79%)

BBand, QKCc1, Trade Price(Last), 20, Simple, 2.0

05/01/2010, 149.64, 142.35, 135.06

Value

USc

Lbs

Auto

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200

210

220

230

240

250

260

270

280

290

135.50

55.74

146.00

125.19

104.39

248.94

O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Tue 05/01/2010

Jean-Marc Anga, Executive Director, ICCO - [email protected]


“We'll run out of cocoa in just SEVEN years!”

“The world will officially run out on October 2, 2020” Star Sunday – 6 October 2013

“No more chocolates by 2020!” “Chocolate bars may get replaced by slabs of palm

oil and vegetable fats packed with raisins and nougat by 2020 ”

The Times of India – 13 April 2014

The “choco-apocalypse 2020”

2

“Don’t panic, but we could be running out of chocolate” “By 2020, the world could see a chocolate deficit of 1m tonnes”

The Telegraph – 17 November 2014

Enjoy those Easter eggs while you can: chocolate prices are expected to double by 2020 as cocoa supplies run low.

The New Zealand Herald; 6 April 2015

International Cocoa Organization (ICCO) | April 2015 3

Development of cocoa prices, in relation to cocoa availability

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

Crop year (Oct-Sep)

Stocks-to-grindings ratio (right scale) ICCO daily price US$/tonne (current)

ICCO daily price US$/tonne (2013/14 terms)

24 Nov 2000: min

US$1,000

Now about:

US$2,775

18 July 1977: max

US$18,000

International Cocoa Organization (ICCO) | April 2015 4

-300

-200

-100

0

100

200

300

400

500

1 500

1 750

2 000

2 250

2 500

2 750

3 000

3 250

3 500

3 750

4 000

4 250

4 500

4 750

5 000

tho

usa

nd

to

nn

es

(S

urp

lus

/De

ficit

)

tho

usa

nd

to

nn

es

(P

rod

ucti

on

/Gri

nd

ing

s)


Source: ICCO

5

ICCO Forecasts for cocoa supply and demand

-300

-200

-100

0

100

200

300

400

500

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

tho

usa

nd

to

nn

es

(S

urp

lus

/De

ficit

)

tho

usa

nd

to

nn

es

(P

rod

ucti

on

/Gri

nd

ing

s)


Cocoa supply surplus/deficit & prices: the long-term trend

Analysis using the Hodrick–Prescott filter


Sources: Euromonitor, ICCO

Global Chocolate Confectionery Sales

versus

Global Farm-gate Value of Cocoa Production

-

20,000

40,000

60,000

80,000

100,000

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

2004/0

5

2005/0

6

2006/0

7

2007/0

8

2008/0

9

2009/1

0

2010/1

1

2011/1

2

2012/1

3

$U

S M

illio

n, 2

01

2/1

3 c

on

stan

t

World Chocolate Confectionery Sa les Farm-gate Value of Cocoa Production

$86.6

billion

$2.6

billion

$109.3

billion

$5.9

billion

7

US Chocolate Confectionery Retail Price vs Farmgate Cocoa Price

(Index: 100 in 1990/91)

0

50

100

150

200

19

90

/9

1

19

91

/9

2

19

92

/9

3

19

93

/9

4

19

94

/9

5

19

95

/9

6

19

96

/9

7

19

97

/9

8

19

98

/9

9

19

99

/0

0

20

00

/0

1

20

01

/0

2

20

02

/0

3

20

03

/0

4

20

04

/0

5

20

05

/0

6

20

06

/0

7

20

07

/0

8

20

08

/0

9

20

09

/1

0

20

10

/1

1

20

11

/1

2

20

12

/1

3

Pric

e I

nd

ex

(1

00

in

19

90

/9

1)

US CPI chocolate confectionery Average Cocoa Farmgate Price Index, real

International Cocoa Price

vs

Farm-Gate Price

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1973/

74

1975/

76

1977/

78

1979/

80

1981/

82

1983/

84

1985/

86

1987/

88

1989/

90

1991/

92

1993/

94

1995/

96

1997/

98

1999/

00

2001/

02

2003/

04

2005/

06

2007/

08

2009/

10

2011/

12

US$

pe

r to

nn

e (

20

12

/13

co

nst

ant)

Average farm-gate price (year average)

ICCO Indicator price (year average)

July 1977:

US$ 18,000

November 2000:

US$ 1,000

Value distribution: low share

for the raw beans

Prebisch–Singer thesis:

decline of the value of the

raw beans against cocoa

manufactured goods


Value chain distribution

Source: Cocoa Barometer, 2015


Main recommendations:

- Countries to develop and implement a

national Cocoa Development Plan derived from

a fully transparent and participatory process

with all key stakeholders involved in the cocoa

sector, through public-private partnerships

- Participants to increase transparency

and coordination of development activities

implemented and planned for the future in the

cocoa sector at national, regional and

international levels, thereby allowing for more

coherent and efficient actions to address the

challenges faced by the sector

What happened at the first World Cocoa Conference ? 19-23 November 2012, Abidjan, Côte d’Ivoire

Outputs:

- Adoption of the Global Cocoa

Agenda, outlining the key issues

facing the cocoa sector and the best

strategy and players to tackle them

- Abidjan Cocoa Declaration: signed

by 35 parties (countries, companies,

associations, NGOs)

9


What happened at the second World Cocoa Conference ? 9-13 June 2014, Amsterdam, The Netherlands

10


Alignment of strategy by the industry

National Cocoa Development Plan & Public-Private-Partnership platform

Highlights of the Conference

Farmers’ income

Amsterdam Cocoa Declaration

11


World Cocoa Conference 2016 22 – 25 May 2016, Bávaro (Punta Cana), Dominican Republic

12

Objectives:

- Take stock of the progress achieved by

stakeholders in the implementation of the Global

Cocoa Agenda adopted in Abidjan in 2012

- Review recent developments in the cocoa

sector.

Special emphasizes:

A special emphasis will be put on the theme of differentiation of various cocoas and cocoa

products as a method of branding and of market development, in order to increase profitability for

producers and added value for both origins and manufacturers.

The WCC3 is organized under the theme:

“Building bridges between producers and consumers”.

For more information: www.worldcocoaconference.org

http://www.worldcocoaconference.org/






Exhibition: an opportunity to promote brands and showcase products and projects to the most influential gathering of professionals from the cocoa and chocolate industry

Networking: the event will attract industry leaders from all geographical regions throughout the entire supply chain. Many side events and parties to be organized during the week.

Learning: an opportunity to learn about the most recent actions taken to ensure the sustainability of the sector and about the latest market developments

Sharing: an opportunity to share experiences during and around the sessions.

13

World Cocoa Conference 2016 22 – 25 May 2016, Bávaro (Punta Cana), Dominican Republic


Structural deficit vs structural surplus: Characteristics and consequences

“Structural” deficit: 1. Price of cocoa surges;

2. Growth of demand for cocoa and chocolate products is reduced, particularly from developing and emerging economies;

3. The industry and consumers seeks cheaper alternatives to cocoa.

3. More investment is made in cocoa growing due to the increased attractiveness of cocoa growing - cocoa production rises;

4. Price of cocoa starts to decline;

5. A period of supply surplus is emerging

……

“Structural” surplus: 1. Price of cocoa falls;

2. Growth of demand for cocoa and chocolate products increases, particularly from developing and emerging economies;

3. Cocoa growing is no longer an attractive business opportunity – cocoa farmers tend to invest in alternative crops (palm oil, rubber, etc.). Younger generation dismiss cocoa growing as an unattractive business proposition; the poorest smallholder farmers, with no alternative to cocoa growing, continues but poverty increases; - cocoa production does not increase to meet potential demand

4. Price of cocoa starts to increase…

5. A period of supply deficit is emerging

……

Both scenario are plausible in the medium term… but oversupply would have a more devastating effect on the sustainability of the cocoa sector. All efforts to improve

the sustainability of the cocoa sector would be partially lost. “Remunerative” cocoa prices that compensate farmers sufficiently to ensure a “living”

income is a necessary condition to ensure the sustainability of the cocoa sector.


The “cocoa ship”: the need to take a long term view;

what are the tools to navigate?


Increasing productivity AND encouraging crop / farm diversification…

Better coordination of initiatives and national policies affecting supply, at national level

(PPPP) and international level…

16

Conclusions Interdependence of actors in the value chain

Better tools to evaluate market situation and future prospects…

Don’t worry, enjoy your chocolate !!!!

Increasing quality, promoting diversity and branding the cocoa origins (de-commoditization) for

better prices…


17

Thank you

[email protected]

17

Documents

Seventh Multi-year Expert Meeting on Commodities …unctad.org/meetings/en/Presentation/SUC MYEM2015 Jean...Seventh Multi-year Expert Meeting on Commodities and Development 15-16 April