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Commodity Trading: Cocoa Futures

Supply / Production Considerations

The Cocoa tree thrives in the lower growth of the evergreen rainforest where the climate meets the following conditions. Temperature is relatively high (average temperature between 66 F to 92 F), rainfall must be plentiful and well distributed with average monthly rainfalls in excess of 1500mm (rainfall below 100mm per month for 3 months will damage Cocoa trees), and shade and humidity are preferable.

The top 10 producing Cocoa countries and their 1997/98 production in thousand tonnes are as follows: Cote d'Ivoire (1150), Ghana (370), Indonesia (310), Brazil (160), Nigeria (155), Cameroon (125), and Malaysia (100).

Cocoa trees take roughly three to five years before a cocoa crop can be harvested. The average Cocoa tree is productive for up to 25 years, so the long lag time between the original planting and production is not a major issue. Cocoa trees do not reach full production capacity until they are roughly 10 years of age.

The Cocoa tree typically produces two crops each year. In Cote d'Ivoire, the largest Cocoa producing nation in the world, the main Cocoa harvest runs from October to March, which is roughly five to six months after the wet season. The mid-crop harvest runs from May through August. The main crop accounts for roughly 75 to 80% of the total Cocoa produced in Africa, while the mid-crop accounts for roughly 15 to 20% of production. The main crop and mid-crop seasons for the rest of the major producing countries is as follows: Ghana (main: Sep/Mar, mid: May/Aug), Indonesia (main: Sep/Dec, mid: Mar/Jul), Brazil: (main: Oct/Mar, mid: Jun/Sep), Nigeria: (main: Sep/Mar, mid: Jun/Aug), Cameroon: (main: Sep/Feb, mid: May/Aug) and Malaysia (main: Oct/Dec, mid: Apr/May).

Because Cocoa has such a long production cycle, and the fact that production tends to be centered in less developed countries, disease is a constant threat to the Cocoa market. Common Cocoa tree diseases are Witches Broom and Black Pod, which are devastating to a Cocoa orchard. The International Cocoa Organization (ICCO), which is a cartel established to ensure fair international trade in Cocoa and to steady supply and support prices, has been fighting these two common diseases for the past several years with moderate success.

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Commodity Trader's Almanac 2008
Scott W. Barrie
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