Sunday, July 18, 2010

Hot cocoa market fuels price fears



Cocoa futures for July delivery on London's NYSE Liffe hit 33-year highs on Thursday, when they expired at ₤2732 ($4811)!

This happened as a few financial groups in Europe has dominated majority of the cocoa, ensuring its future market share for higher profit. Dominating the market enables firms to raise cocoa's price even further, which creates worries.

They dominate the market share by buying up or chasing out existing firms which are less efficient, buying up all the supplies. Meanwhile, they decrease supply released into market to push up price.The situation worsens when stock of global cocoa have been decreasing for the past five years on poor weather and increase in demand.

Those financial groups are BNP Paribas and Newedge Group. However, they refuse to comment on their act whether their action is taken for the welfare of themselves or customers.

The International Cocoa Organisation claimed that the fluctuations of price signals concerns over its availability in the short term.

Now, the only hope to prevent hoarding is on Ivory Coast where the most of the cocoa beans are grown.

Analysts expect the output to stay weak with new investment in West Africa, encouraging stockpiling.

1 comment:

  1. Those handful companies should not dominate cocoa market to push up price and even control its supplies in the market. Cocoa can be seen as a vital raw material for various industries. They should not act in this way as this will only entangles consumers in the end. Government should set cocoa as a controlled goods and fix a maximum selling price to protect consumers as well as small firms,increasing competition for improvements...

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