Trade news
Coffee and cocoa’s trading as a whole
From HR Maritime, the number of trading houses around the lake is high.
Let us remember that the leman region is
On the left: % of nbr of trades (from HR maritime)
On the right: USDA report on coffee world production
There are many commodity trading house of coffee and cocoa in Geneva. We will focus on some of them.
The big players of coffee are nearby :
- Sucafina
- Louis Dreyfus
- OLAM international
- Ecom agro (in Lausanne)
Many small/medium size companies:
- Walter Matters
- DIT
Traders in coffee are usually traders in Cocoa as well. So if you find a coffee trading house, there is a very high chance that it trades Cocoa as well.
What you can usually find on the traders’ website news are usually the same:
- M&A
- Sustainability
- CSR
- Actions in favour of 3rd world countries
It seems like they put a lot of effort into marketing themselves as good companies or big companies that buy other companies.
Where do the traders hang out? According to some traders:
- Chez Philippe
- River Side Café
Very well situated according to the map
What about coffee/cocoa traders? Where can we find them?
SCTA (Swiss Coffee Trade Association)
Themes:
Where are they?
We find all the big buyers and traders in the list:
Also:
Where sponsors are mainly coffee buyers. We can find big players:
- Mövenpick
- Jakobs Douwe Egberts (joint venture of Mondelez and DE master blender)
- HERMO (torefactor company in Switzerland)
- Lavazza (Italian company big in the coffee market as buyers)
Coffee traders wage according to “glassdors”:
Also seen: 75-80k in other job offers in indeed.ch (for coffee/cocoa)
(All sectors)
In Switzerland
In Geneva
The jewel in chocolate – Cocoa business in Asia
According to an article from Reuters, many markets in Asia are showing a grow appetite for chocolate-based products. This might mean for cocoa trading companies that Asia could be one of the current market to target and to supply. Indeed, Olam International, a leading food and agri-business supplier and coffee/cocoa trader listed on the Singapore stock exchange, decided to boost its presence in this sector in Asia and planned to supply more cocoa thanks to an investment in the origination, processing and research of this commodity in Indonesia.
The company acquired 85% share in the parents of Indonesia’s largest cocoa processor (BT Cocoa) by making an investment of $90 million.
The project is the following; making an international surplus of 100’000 tonnes from the upcoming cocoa crop. We could imagine that traders would have to face to a decrease of the cocoa’s price due to this surplus.
In such a situation, it is highly recommended to be long physical and short future for cocoa.
Besides cocoa, Olam International’s CEO, Sunny Verghese, told that coffee’s market could potentially face to a rally.
As cited in the previous bulletin, Brazilian coffee producers expect to get a bumper harvest of Arabica and Robusta’s coffee beans for 2019, that would normally decrease the price of coffee. However, Sunny Verghese added that this bumper harvest might be lower than expected because of possible adverse weather conditions in Brazil.
This information might tell to coffee traders to be prepared of an increase of the coffee’s price.
The recommendation for coffee’s traders would be to be short physical and long future for coffee.
As a result, coffee and cocoa will probably show an interesting change in their prices that traders have to capture.
This newspaper is interesting for students in commodity trading’s major at the HEG or in commodity trading master at the University of Geneva, who are interested by coffee and cocoa trading and by emerging markets such as the Asian market. Indeed, companies based in Geneva such as Olam International will need dynamic and young graduated traders to meet the demand in these markets.
Sucafina prize of excellence for the master’s thesis in commodity trading
The CEO of Sucafina, a multinational coffee merchant founded in 1977 and based in Geneva, has awarded the Sucafina prize of Excellence to a student at the Geneva School of Economics and Management (GSEM) for his Master Thesis in commodity Trading.
This newspaper might be interesting for students in commodity trading who have to write their bachelor/master thesis about a topic in Commodity Trading.
Such an award demonstrates hard work and skills which might open doors for interesting opportunities in commodity trading companies.
Review of February market situation of Cocoa
The cocoa is a niche market having a total production of 4.65 mio kg per year which is quite small compared to coffee with a total production in 2017/2018 of approximately 9600 mio kg per year. This means a production more than 2000 times bigger than cocoa.
The organisation having the biggest influences over this market is ICCO, International Cocoa Organisation, which functions such as OPEC but for cocoa.
There are 2 futures market, one situated in London (ICE Futures Europe), and one in dollars in New York (ICE Futures U.S.).
Finally, for the spot price, ICCO provide also daily prices denominated in U.S. dollars.
The chart below shows the development of the futures prices on the London and New York markets at the London closing time. Both prices are expressed in US dollars in order to compare them easily. The London market is pricing at par African origins, whereas New York prices at par Southeast Asian origins. Indeed, Cocoa need to grow hot and humid region that is why, we will find mainly production in Africa mainly dispatch between Côte d’Ivoire and Ghana and in Asia, mainly in Indonesia.
We can observe on firsts days of the chart, a quite strong difference of futures prices between the two markets. It can be explained by the implementation in May 2017 of changes in the grading rules for ICE Europe. That led to a substantial increase of prices due to higher norms for cocoa which impacted the African market. For instance, 2’000 tonnes failed the submission for grading because of that rule. However, we can see a convergence from 5thFebruary which were due to return to normal market configuration.
By looking at the global trend in February, the market is in contango, the contract prices perked up on both the London and New York markets as seen.
This upward trend can be explained by weather conditions adequate for the growth of cocoa in some West African cocoa growing regions as well as good expectations from market participants and forecasters.
Subsequently, compared to prices at the start of the month, future prices rallied by 9% from US$2,083 to US$2,269 per tonne in London, and by 3% from US$2,178 to US$2,238 per tonne in New York by the end of February.
However, at a certain stage, the supply exceeds the demand. The price stopped to increase and therefore, this bullish stance did not continue. From 20thFebruary onwards, projections suggesting that the top cocoa supplier was racing toward another record level in cocoa production resulted in a downward turn in prices. Thereafter, the front-month contract prices plummeted by 2% from US$2,310 per tonne to US$2,269 per tonne in London, and by 3% from US$2,302 per tonne to US$2,238 per tonne in New York.
Sources
REUTERS, 2019. “Singapore’s Olam says to expand “crown jewel” cocoa business, Q4 profit drops”. Reuters(online). February 28th, 2019. (Consulted on March 26th, 2019). Available at https://www.reuters.com/article/olam-results/singapores-olam-says-to-expand-crown-jewel-cocoa-business-q4-profit-drops-idUSL3N20N2P1
REUTERS, 2019. “Olam takes control of Indonesia’s top cocoa processor”. Reuters(online). February 26th, 2019. (Consulted on March 26th, 2019). Available at https://www.reuters.com/article/yts-ma-olam-intl/olam-takes-control-of-indonesias-top-cocoa-processor-idUSL5N20L4RC
Sucafina, 2018. “Sucafina prize of excellence for the master’s thesis in commodity trading”. Sucafina(online). November 30th, 2018. (Consulted on March 26th, 2019). Available at https://www.sucafina.com/news/news-updates/sucafina-prize-of-excellence-masters-thesis-commodity-trading/
JOBS Salaire, 2019, (consulted on March 27th, 2019) Available at https://www.jobs.ch/fr/salaire
Glassdoor Salaire, 2019, (consulted on March 27th, 2019) Available at https://fr.glassdoor.ch/Salaires/coffee-trader-salaire-SRCH_KO0,13.htm
WhoMovesTheCoffeeMarkets? MeetTheWorld’sLargestGreenCoffeeTraders (consulted on March 27th, 2019) Available at:https://commoditytrading.guru/commodities/who-moves-the-coffee-markets-meet-the-worlds-largest-green-coffee-traders/
OLAM website (consulted on March 27th, 2019) Available https://www.olamgroup.com/news/all-news.html
USDA Report, PDF (consulted on March 27th, 2019) Available at
HR Maritime website, Why Geneva, (consulted on March 27th, 2019) Available athttps://hr-maritime.com/geneva/why-geneva/
Google Maps, Website (consulted on March 27th, 2019) Available athttps://www.google.com/maps
Louis Dreyfuss website, (consulted on March 27th, 2019) Available at
International Cocoa Organization (ICCO), (consulted on March 27th, 2019). Available at : https://www.icco.org/statistics/monthly-review-of-the-market.html