AMSTERDAM: Price differentials in Europe's cash cocoa market were unchanged this week as the market kept a watch on weather conditions in western Africa for any leads about the quality of the new crop, traders said.
"August is a critical month for bean quality and it makes the market very quiet," one trader said.
Meagre rains and overcast weather last week in the Ivory Coast's cocoa-growing regions were generally bad for the development of the forthcoming 2011/12 main cocoa crop.
Ivory Coast differentials were about 60 pounds over London nearby cocoa futures contracts, the same as last week. Ghana differentials were 110 pounds over London nearby futures contracts.
Better-than-expected cocoa production in West Africa will boost global output to 4.2 million tonnes in the 2010/11 season, creating a surplus of 325,000 tonnes, the International Cocoa Organisation (ICCO) said on Wednesday.
The output in Ivory Coast and Ghana, which together produce more than half of the world's cocoa, is expected to decline next year.
"The market is still ruled by macroeconomic moves," another trader said.
European cocoa stocks have been slowly drawn down this year as exports from Ivory Coast, the top producer, were halted for more than three months because of the political conflict, forcing cocoa consumers to rely on other sources and existing stocks outside of the country.
Valid cocoa stocks in NYSE Liffe's nominated warehouses as of August 8 fell to 103,170 tonnes from 107,470 on July 25, exchange data showed.
Traders are now watching the development of the next cocoa main crop after a record 2010/11 crop estimated at up to 1.6 million tonnes, not including an estimated 100,000 tonnes expected to be smuggled out through Ivory Coast's neighbours.
Cocoa arrivals at ports in Ivory Coast reached around 1,382,000 tonnes by August 7, up some 25 percent from the same period last season, exporters estimated on Monday.
Price ratios for cocoa butter, a key ingredient in chocolate, were unchanged at 1.22 times London bean contracts
"We expect ratios to pick up in September when people come back from holidays and start making purchases for the time of festivities, Halloween, Christmas, New Year," one trader said.
Copyright Reuters, 2011
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