Cocoa prices rise to near 4-year peak

COCOA prices have surged to an almost four-year high in recent days, going above the US$1,600 per tonne level due to concerns that the prolonged dry weather and crop disease in Western Africa will affect world supply.

The price of the commodity has been on a rising trend for the last eight months on industry expectations of lower output in the two largest cocoa producing countries, Ghana and Ivory Coast, which have been experiencing drought conditions since mid-December last year.

A Financial Times of London report quoted brokers as saying they believed that speculators and hedge funds were expecting the market to break higher on any problem with the Ivorian mid-crop.

The recovery in the cocoa price has reinforced efforts by the Malaysian Cocoa Board to popularise commodity among smallholders. The board hopes the government would give additional funds to the industry to expand cocoa acreage, which has fallen substantially over the last 20 years.

Board chairman Datuk Kelvin Tan has pointed out that cocoa could be a lucrative crop for smallholders if they planted high-yield trees.

Industry officials estimate the production cost of Malaysian cocoa by smallholders to be under RM2,500 per tonne. At current prices, smallholders will be able to make a hefty profit from their crop.

According to the Treasury Economic Report, Malaysia – once the world’s third largest cocoa producer with annual production of more than 350,000 tonnes in the early 1980s – produced about 70,000 tonnes in 2000.

The mid-1980s were the golden years for cocoa planters, when the price of the crop went up to RM8,000 per tonne due to prolonged frost in Brazil, formerly the world’s biggest producer.

In the 1990s, many plantation companies and smallholders abandoned cocoa as a commercial crop when the price of the commodity crashed due to over-production.