Archive for year: 2011

The ICCO’s Seminar on Cocoa Terminal Markets in mid-June brought representatives of a number of ICCO member governments up to date with the latest developments on the commodity futures markets.

The Seminar, which took place at the ICCO’s London headquarters from 13 to 16 June, briefed policy makers and their advisors on the important role that the terminal markets play in the world cocoa economy, by shifting price risk through hedging, by providing information for storage decisions and by acting as centres for the collection and dissemination of price information.

The Seminar took place against the background of events in July 2010, when London’s NYSE Liffe cocoa futures market was the subject of much press interest, due to a large position taken by a single market player. The incident raised concerns about the transparency, integrity and efficiency of terminal markets, and led to calls for stronger regulation of that market by the European and UK financial authorities.

In order to assist delegates to understand these market developments, the Seminar reviewed the various types of contractual arrangements used to trade cocoa, looking in-depth at futures contracts and their trading, before examining the competitive structure of the markets themselves, the role of brokers and other professionals in the markets.

ICCO Executive Director a.i., Dr Jean-Marc Anga, welcomed about 40 participants to the Seminar, which was conducted by the ICCO’s Econometrician Dr Michele Nardella and Economics and Statistics Director a.i. Laurent Pipitone. It also included presentations by speakers from both of the world’s major cocoa exchanges–Ian Dudden, Director of Commodity Derivatives at NYSE Liffe, as well as Thomas Farley, President and Chief Operating Officer of New York’s ICE Futures US—each of whom provided an insight into the functioning of their respective futures markets.

The Seminar also addressed the way fundamental factors affect futures prices, and taught delegates the importance of basis prices, spreads between different delivery months, and their connections with expected spot prices and storage costs, in order to illuminate the way the futures markets work.

The practicalities of using the futures markets, and of employing various hedging strategies to mitigate the impact of any decline in cocoa prices, comprised another section of the Seminar. Also included were a series of practical case studies, suggesting strategies for grower co-operatives, exporters and traders.

The Seminar concluded with a guided visit for the participants to the NYSE Liffe cocoa grading room in London, where they were hosted by Robin Dand, Lee Watson and Barry Readings of the Exchange.

Each participant was presented with a certificate at the conclusion of the four-day Seminar, and the positive reactions to the presentations were such that the Secretariat is seriously considering repeating the Seminar in the near future.

An International Cocoa Organization Workshop that began on 7 June in Cameroon marked the launch of a major programme to help African cocoa producers maintain their market access in the face of stringent pesticide residue legislation.

Pesticide residue regulations published by the European Union, the USA and Japan could affect the cocoa trade and deprive millions of smallholder farmers and their governments of the much needed revenues required for poverty alleviation programmes. These Sanitary and Phytosanitary (SPS) measures, relating to pesticide residues and other harmful substances, have to be met by imported cocoa.

The Workshop–which took place 7 – 10 June in Yaoundé, Cameroon–was the first stage in the ICCO project ‘SPS Capacity Building in Africa to Mitigate the Harmful Effects of Pesticide Residues in Cocoa and to Maintain Market Access’. It brought together government agencies responsible for the cocoa sector, national food safety organizations, institutions responsible for the registration and use of pesticides, farmers, cocoa associations and important members of the cocoa trade and industry.

In partnership with the Standards and Trade Development Facility, the United Nations Industrial Development Organization, CropLife International, and COLEACP/EDES, the ICCO project aims to assist cocoa producing countries to strengthen their expertise and capacity to implement international SPS standards, thus improving their ability to gain or maintain market access for their cocoa beans.

The project will involve five major African cocoa producing countries—Cameroon, Côte d’Ivoire, Ghana, Nigeria and Togo—each of which will be represented and make presentations at the Workshop.

As African cocoa producers account for 75% of world cocoa exports, it is crucial to help them understand and respond to the international SPS standards. An important part of the approach is assisting farmers and other cocoa supply chain stakeholders to adopt good agricultural and warehousing practices.

For more information, please click here to visit the dedicated new section of the ICCO website: www.icco.org/sites/sps

Dr. Jean-Marc Anga, Executive Director a.i., previewed the statistics in the upcoming Quarterly Bulletin of Cocoa Statistics during an interview on the state of the cocoa market with Bloomberg News on 25 May.

The Executive Director a.i. presents his compliments and has the honour to refer to the decision taken by the International Cocoa Council during its 83rd regular session in March 2011 related to document ED(MEM) 923/Rev.1 concerning the implementation of the recommendations of the First and Second Roundtables on a Sustainable Cocoa Economy (RSCE1 and RSCE2).

Members and Observers who have not yet responded are kindly requested to consult as appropriate with the relevant agencies and institutions in their countries in providing information to the Secretariat on the activities and initiatives underway pursuant to the above-mentioned recommendations and to complete and return the questionnaires to the Secretariat at the earliest opportunity.  In this connection, it is noted that the European Union has undertaken to reply to the Secretariat on behalf of its Member States.  The Secretariat would also welcome any other feedback or comments that Members and Observers may wish to make (with or without a completed questionnaire) related to the two Roundtables.

The information provided within the questionnaires and replies will be presented in document ICC/83/6/Rev.1, for consideration by the Council at its 84th regular session in September 2011.

The questionnaires, the “Accra Agenda”, the “Declaration of Trinidad and Tobago” and document ICC/80/7 on the “Implementation of the Recommendations of the First and Second Roundtable Meetings for a Sustainable Cocoa Economy” were attached with ED(MEM) 923 and ED(MEM) 923/Rev.1.   To save paper and costs, these documents are not being re-circulated. They are available to download here.