es real el deficit de 1 millon de toneladas en el 2020?
TRANSCRIPT
Guayaquil , Sept 02 2015
Pamela Thornton Armajaro Asset Mgmt
Es real el deficit de 1 millonde toneladas en el 2020?1 million ton cocoa deficit. Fact or Fiction?
Page 1
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Page 2
All data as at 30 March 2012 unless otherwise stated.
•CMAA•ARMAJARO
3
RESUMENSUMMARY
• The 1 mil ton in 2020 deficit projection – La proyección del déficit de 1 mil toneladas en 2020
• Price Determinants – Factores Determinantes de Precio
• Short Term Price Drivers – Factores de Precio Corto Plazo
• Long Term Structural Changes – Cambios Estructurales a Largo Plazo
• Current Demand – Demanda Presente
• Current Supply – Oferta Presente
• Conclusion - Conclusión
Page 4
SLIDE FROM WCF PRESENTATION 2010
• By 2020 we are going to need at least 4.5 mil tons pa to satisfy projected demand for cocoa
• This equates to 900 kmt pa more than we produced in 2009/10 or 700 kmt more than projections for 2010/11
• Where is the cocoa required to satisfy this future demand going to come from?
Page 5
Page 6
Oferta y Demanda 2020 – Noticias Destacadas de
Noviembre 20142020 S&D Picture – Headlines in November 2014
* ICCO statement 21st November 2014
Bajos/Pobres Recursos Macroeconónomicosy GlobalesGLOBAL COCOA MACRO ECONOMIC RESOURCES
• No major governmental organization provides cocoa data because cocoa is not considered a “strategic” food
• ICCO is a government to government organization. Produces the best production/stocks info in the public domain
• But ICCO data is essentially backward-looking research with a political component. Have to accept production and demand numbers provided by individual country members egIndonesia, Ghana
• Key producers lack the financial resources to conduct an inventory of the area under cocoa , planting density, age profile of trees etc. Little idea about their crop
Page 7
• The cocoa industry spends millions on sustainability conferences and programs, has done constructive scientific work such as mapping the cocoa genome etc. but has no inventory of global cocoa resources from which to derive a baseline for any forward planning
• Little money available for the provision of statistical research
• Approx. 10 private companies conduct their own global field forecasting exercises. Secretive.
8
LOS RIESGOS de SER PRODUCTIR DE CACAORISKS OF BEING A COCOA FARMER
• Weather and war
• Pests and disease
• Biggest risk to commercial planting is PRICE
• Since Jan 2008 global cocoa prices have been above $2000/mt
• But you are operating in an area with no government price supports
• With little independent research about supply and demand in the future
• And you produce a single use commodity
9
FACTORES DETERMINANTES DE PRECIOPRICE DETERMINANTS
• Caution needed
• Volatile commodity
• Short-term – speculative money flows
• Long-term – structural change
• Medium-long term – cocoa supply and demand
• Impact softened by ability to store goods at point of consumption
10
PRECIO del CACAO: VOLATILIDAD HISTORICACOCOA HISTORIC PRICE VOLATILITY
• 1970s period of high food price inflation
• July 1977 record cocoa price - $5368/mt
• In real terms today = $21140
• 1979 CDI refused to participate in international cocoa agreement as price was too low – claimed cost of production $1.86 = $4100
• 1992 = $790
• 1997 = $1750
• Dec 2000 = $674 before political instability in Cote d’Ivoire caused major price adjustment
• Since 2004 lowest price is $1300/mt
• Peaks $3775 during CDI civil war and $3350 Ebola crisis11
CORTO PLAZO: FLUJOS ESPECULATIVOSSHORT-TERM: SPECULATIVE MONEY FLOWS
• Recent events a good example
• 2013/14 global ending cocoa stocks estimated at around 1.5 mmt
• Equivalent to 150k lots
• Managed money = immediate short-term speculative risk
• Collated from COTs London and NY
• A - Sept 2014 = 1.42 mmt or 95% of world stocks
• B- March 2015 = 0.72 mmt or 48% of world stocks
• C -July 2015 = 1.50 mmt or 100 % of world stocks
• D -25 th August they held 0.83 mmt =55% of world stocks
12
Precio – Sept 14 a la fechaPrice – Sept 14 to present
13
2850
3350
2700
3386A
B
C
D
+1.75 mmt
+0.72mmt
+1.56mmt
+0.94mmt
A LARGO PLAZO: CAMBIOS ESTRUCTURALS la DEMANDA lo REQUIERELONG TERM: STRUCTURAL CHANGES DEMAND SIDE
• Changes in eating habits eg health concerns
• Opening up of new markets for chocolate eg Asia
• Move from local shops to supermarkets – from local products to international brands typically upgrades quality
14
Dem
an
d
CAMBIOS ESTRUCTURALES a LARGO PLAZO: la dinámica de LA OFERTALONG TERM: STRUCTURAL CHANGES SUPPLY SIDE
• Climate change
• Aging trend of cocoa farmers globally
• Urbanization – the move to the cities
• Wars
• All helpful for price
• New market participants on large scale
• Negative for price
15
PR
OD
UC
TIO
N
CAFÉ Y EL CASO DE VIETNAMCOFFEE AND VIETNAM EXAMPLE
1981/82
• Global coffee production =98.9 m. bags
• Brazil #1 = 34.6 m. bags
• Colombia #2 = 12.9 m. bags
• Robusta #1 Indonesia = 5.7 m. bags,
• Robusta #2 Ivory Coast = 4.2 m. bags
• Vietnam produced just 80,000 bags
2000/01
• Global coffee production = 116.4 m. bags (+17%)
• Brazil #1 = 35.0 m. bags but now #2 robusta producer = 7.6 m. bags
• Vietnam # 2 = 15.3 m. bags
• Colombia #3 = 10.5 m. bags
16
PRICE IMPACT
1981/82
• 1982 arabica price
• = 127.50 cents/lb
• = $2810/mt
• 1982 robusta price
• = 98.23 cents/lb
• = $2165/mt
2000/01
• 2001 arabica price
• = 93.77 cents/lb
• = $2068/mt (-26%)
• 2001 robusta price
• =40.14c/lb
• =$884 (-59%)
17
Producción en Vietnam comparada con Costa de MarfilVietnamese Production Compared to the Ivory Coast
0.00
5.00
10.00
15.00
20.00
25.00
30.00
90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15
M. 6
0 k
g b
ags
Crop Year
Vietnam Ivory Coast
18
1984-1992 – UNA HISTORIA MUY SIMILAR CONS CACAOSIMILAR STORY IN COCOA 1984-1992
• In 1983/84 a Super El Nino
• Widespread climatic problems
• Drought in South Sahara
• Food crops in W Africa suffered
• Starving Burkinabe and Malians moved south to Cote d’Ivoire
• CDI had an open doors policy - huge influx of immigrants
• Cocoa prices high 1983-85 – approx.$2800/mt
• Chopped down rain forest and started to grow cocoa
• As crop expanded - prices began prolonged collapse
• CDI crop grew from 411kmt (83/84) to 750kmt (1990/91)
19
LA ECONOMIA DEL SECTOR CACAOTERO EN AFRICA OCCIDENTALECONOMICS OF COCOA PRODUCTION IN WEST AFRICA
• Land free
• Once planted - ongoing production - 30 years+
• “Lazy Man’s Crop”
• Lack of alternative employment
• No capital to switch to other crops - cost of planting/delay to harvest
• Major physical effort to switch – many hours of labor
• No motivation unless trees dying
• Production price elasticity very low when prices weak
20
• Non-economic farmers make life very difficult for competitors
• Especially if they are big
• Don’t forget the Ivorian farmer can be motivated
• Will expand production when prices are strong
• New plantings
• More inputs
21
•Cocoa Demand
Page 22
Dem
an
d
Tendencias de Oferta – Fuerte Lazo Histórico al PIBDemand Trends – Strong Historical Link to GDP
Page 23
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Armajaro Grind Model
Grind growth forecast Grind growth actual
G7 PP GDP Growth/dollar index/sterling index
Source: Armajaro
Dem
an
d
Tendencias de Oferta – Fuerte Lazo Factores MacroDemand Trends – Strong Link to Macro Factors
Page 24
60
65
70
75
80
85
90
3400
3500
3600
3700
3800
3900
4000
4100
4200
2005 2006 2007 2008 2009 2010 2011 2012 2013
Cocoa Grind Vs US New Car Sales
Cocoa Grind New Car Sales
40
42
44
46
48
50
52
54
56
58
60
3400
3500
3600
3700
3800
3900
4000
4100
4200
2005 2006 2007 2008 2009 2010 2011 2012 2013
Cocoa Grind VS Chicago PMI Index
Cocoa Grind PMI Index
2 000
2 500
3 000
3 500
4 000
4 500
20 000
25 000
30 000
35 000
40 000
45 000
50 000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Mil
es d
e m
illo
nes
Grind Vs Global GDP
Grindings Global GDP (Constant 2000 US$)
• Well-established demand trends have
maintained their relationships over decades
Source: Armajaro/World Bank/IMF
Dem
an
d
2014/15: desconexión entre el molido mundial y el PIB World grind: 2014/15 disconnection from GDP growth
25
2 000
2 500
3 000
3 500
4 000
4 500
10 000
15 000
20 000
25 000
30 000
35 000
40 000
World GDP
World grind
Dem
an
d
-$103
-$428
-£145
-£10
£1£13
-£308-£296
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
50
Indonesia Malaysia Hamburg ADM/Cargill Nigeria Ghana mid Ghana main CDI
Márgenes del Procesamiento: números negativos a nivel globalProcessing margins: negative across the world
26
Dem
an
d
Molido annual: crecimiento desde 1961World grind: annual growth since 1961
27
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Dem
an
d
Molido annual: oferta en 2020World grind: demand in 2020
28
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Dot-com bubble/subprime mortgage crisis
Global financial crisis
2014/15 disconnection
Dem
an
d
Consumo Aparente: 2020Apparent consumption in 2020
29
0
1 000
2 000
3 000
4 000
5 000
6 000
Developed countries Developing Countries
Dem
an
d
DEMANDA A LARGO PLAZOLONGER TERM DEMAND
• Cocoa grind forecast to rise by 991 kmt between 2010 and 2020 to 4.702 mmt
• Necessary to split developed and developing country trends
• Developed countries consumption has grown at an average rate of 1.6% over the last 20 years
• Developing countries have been growing faster, at + 4% but less stable as chocolate consumption not embedded in diet
• Developing economies consumed 19% of cocoa in 2010
• By 2020 estimated to consume 27% of production – population growth and eating habits copied from West
• Using different trends for developed and developing countries, apparent consumption is projected to rise by 1.025 mmt from 09/10 to 4.655 mmtin the 19/20 season.
30
Dem
an
d
AMENAZAS A LA DEMANDATHREATS TO DEMAND
• Negative media attention alienating especially younger customers – child labor, de-forestation, obesity
• Changing dietary habits – less sugar, less calories, smaller bar sizes
• More emphasis on health/nutrition bars – perhaps with lower chocolate content
• Switch to alternative/cheaper snacks – chips, cookies
• Switch to higher quality/more expensive/dark chocolate consumed in lesser quantity
31
Dem
an
d
•Oferta: El Pronóstico
•Supply Outlook
Page 32
PR
OD
UC
TIO
N
•Cocoa production has continued to follow an upward trend of approx. 2% a year
•Strongest global crop on record was in 2013/14, at 4.364 mil.mt
• Increased production primarily due to new plantings in CDI and Ecuador
•Can cocoa production continue to expand at this rate?
Page 33
PR
OD
UC
TIO
N
Producción Global de Cacao: 1984-2015Global Cocoa Production 1984-2015
Page 34
1000
1500
2000
2500
3000
3500
4000
4500
000’
s to
nn
es
Global Production
Lineal (GlobalProduction)
Source: Armajaro
PR
OD
UC
TIO
N
Tendencias de Producción por ContinenteProduction Trends by Continent
35
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
Africa Asia Latin America
PR
OD
UC
TIO
N
Tendencias de Producción: base 100 en 1983Production trends: base 100 in 1983
36
0
50
100
150
200
250
300
350
400
450
500 Asia Africa Latin America
Witches Broom
Decline of Malaysia disease
Consistent upward trend?
PR
OD
UC
TIO
N
Tendencias de Producción – Orígenes PrincipalesProduction trends – Major origins
37
0
250
500
750
1 000
1 250
1 500
1 750
2 000 Côte d'Ivoire Ghana Indonesia Brazil Ecuador
PR
OD
UC
TIO
N
Precio pagado al producer Farmgate prices
38
$0
$500
$1 000
$1 500
$2 000
$2 500
$3 000
$3 500
$4 000
$4 500 Côte d'Ivoire Ghana Brazil Ecuador
PR
OD
UC
TIO
N
Precios Futuros – Performance desde Marzo 2010Futures Prices – Performance Since March 2010
Page 39
-50%
-30%
-10%
10%
30%
50%
70%
90%
110%
130%
150%
Palm Oil Rubber Orange Juice Rice Cotton Cocoa
Only cocoa has higher
futures prices in Jan 2015
compared to 5 years ago
but marginal
Source: Reuters
PR
OD
UC
TIO
N
•1. Indonesia
Page 40
IN
DO
NEIS
A
• Indonesia remains 3rd largest cocoa producer, but trend is downwards as farmers move into palm oil and rubber
• Farmers have battled with diseases and aging trees
• Small plot size - <1 ha
• Production has dropped for 6 consecutive years
• Farmers have the ability to modernize their farms
• Prices are good and closely track the world market
• But competing economy activities are the risk to cocoa
• Children do not want to take over farms
41
IN
DO
NEIS
A
Indonesia – Tendencia Estructural or Temporaria? Indonesia – Structural Downtrend or Temporary?
Page 42
0
1
2
3
4
5
6
7
1980 1985 1990 1995 2000 2005 2010
Mil
lio
ns
Acr
es
Acreage
Cocoa, beans Oil, palm fruitRubber
0
5000
10000
15000
20000
25000
30000
35000
40000
1980 1985 1990 1995 2000 2005 2010
00
0’s
to
nn
es
Palm Oil Production
0
100
200
300
400
500
600
1980 1985 1990 1995 2000 2005 2010
00
0’s
to
nn
es
Cocoa Production
Source: Armajaro Data/ World Bank
0.9
1.0
1.0
1.1
1.1
1.2
1.2
1990 1995 2000 2005 2010
Mill
ion
Sq
. Km
Rainforest Area
IN
DO
NEIS
A
Palma de AceiteOil Palm
Page 43
Expansion of acreage in Indonesia
• Oil palm needs a rainforest climate
– high humidity and temperatures
– therefore a lot of plantations are
established at the expense of
rainforests
• Major importers include India,
China and the EU
• Fundamentals are good, with
demand forecasted to increase as
many developed economies shift
away from the use of trans-fasts to
healthier alternatives
• Strong demand also coming from
biofuel and energy sectors
Source: GreenPalm
IN
DO
NEIS
A
Comparación de IngresosIncome Comparison
Page 44
700
720
740
760
780
800
820
840
Cocoa Coffee Rubber Oil Palm
US
$ p
er h
ecta
re p
er y
ear
Net Income Potential for Different Smallholder Crops
3-5 years 4-6 years 10+ years 3-7 yearsLag between
planting and
positive cash
flow
Sources: Indonesia, A business case for sustainable coffee production
IN
DO
NEIS
A
•2. South America
Page 45
SO
UTH
AM
ER
IC
A
0
50
100
150
200
250
300
350 Brazil Ecuador Peru
Patrones de Producción: Ecuador vs. Brazil vs. PeruProduction trends: Ecuador vs. Brazil vs. Peru
46
SO
UTH
AM
ER
IC
A
0
50
100
150
200
250
300
350
400
450
Brazil
47
Diseases account for losses of more than 30% of the potential crop each year.
Brazil suffered an outbreak of witches broom in the mid 90s.
Actively using CCN51 and equivalents and seeking more disease resistant/tolerant
planting material.
SO
UTH
AM
ER
IC
A
PRODUCCIÓN en ECUADOR: 1990/91 - PRESENTEECUADOR PRODUCTION 1990/91 - NOW
48
0
50
100
150
200
250
SO
UTH
AM
ER
IC
A
•3. West Africa
Page 49
WES
T A
FR
IC
A
Patrones de Producción: Ghana y Costa de MarfilProduction Trends – Ghana & Côte d'Ivoire
Page 50
-600
-400
-200
0
200
400
600
800
1000
1200
35%
40%
45%
50%
55%
60%
65%
(Gh
an
a &
Cô
te d
'Iv
oir
e) –
Res
t o
f W
orl
d C
rop
% o
f W
orld
Cro
p
Combined production from Ghana
& Ivory overtook the rest of the
world in 1995/96. This trend has
increased ever since.
60% of total crop threshold
Source: Armajaro
WES
T A
FR
IC
A
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Côte d'Ivoire
Ghana
Patrones de Producción: Costa de Marfil vs. Ghana Production trends: Côte d’Ivoire vs. Ghana
51
Market feared CI was in a top out phase in the mid 2000’s.
Ghana production declined 26% in 2014/15.
Ghana to partially recover in 15/16 but downward trend might be in place.
WES
T A
FR
IC
A
Patrones de Producción: Costa de Marfil vs. GhanaProduction trends: Côte d’Ivoire vs. Ghana
52
-12%
9%
-11%
-4%
40%
-12%
1%
10%
6%
-14%
21%
-1% -2%
34%
-13%
1%
20%
-30%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Côte d'Ivoire
Ghana
First time we see a proper disconnection between Côte d’Ivoire and Ghana growth.
WES
T A
FR
IC
A
Competencia x Tierra entre ProductosAgrícolas:1980-2013Land Competition between Crops 1980-2013
Page 53
0.0
0.5
1.0
1.5
2.0
2.5
1980 1985 1990 1995 2000 2005 2010
Mil
lio
n A
cres
Ghana
Cocoa beans Maize Oil palm fruit Rice, paddy
Source: FAO Stat
0
0.5
1
1.5
2
2.5
3
1980 1985 1990 1995 2000 2005 2010M
illi
on
Acr
es
Côte d'Ivoire
Cocoa beans Coffee, green Maize
Oil palm fruit Rice Natural rubber
• No indication of significant land loss to other crops
• Farmers traditionally grow different crops to diversify income sources
• Familiarity of cocoa and fixed prices provide incentives compared to competing crops
• Whilst yields are stable/marginally increased over the years, production rises have been due to new plantings.
WES
T A
FR
IC
A
LA SITUACIÓN en GHANA empezando 2010-11GHANA SITUATION SINCE 10/11
• Farmer price stalled as government spending caused budget deficit
• CMC cut back on fertilizer and mass spraying programs
• Oil economy
• Rural migration esp of young
• Alternative land use (see previous) opportunities esp in gold mining
Page 54
WES
T A
FR
IC
A
Migración Urbana-Rural en GhanaGhana Rural: Urban Migration
Page 55
10%
20%
30%
40%
50%
60%
70%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Employment in Agriculture (% of Total Employment)
Source: IMF
Rapid change since 2006
WES
T A
FR
IC
A
EL PROBLEMA EN GHANA - COSECHA 2014/15GHANA PROBLEM - CROP 2014/15
• Unexpected collapse in crop for 14/15
• Not seen in our pod counts
• Fertilizer distribution was delayed but impact should be expressed in pod load/survival
• No weather issues-good rains, harmattan only hit in late Dec/early Jan
• No abnormal disease issues
• Decline from 950 kmt to 705 kmt
• An unprecedented drop of 26%
• One-off or structural change?
• How so sudden?
Page 56
WES
T A
FR
IC
A
Nigeria: Producción de Cacao y PetróleoNigeria Cocoa & Oil Production
Page 57
0
500
1000
1500
2000
2500
3000
50
100
150
200
250
300
350
m. B
arr
els
000'
s to
nn
es
Cocoa Oil
Source: Armajaro/Energy Information Administration
WES
T A
FR
IC
A
Oro – Foto tomada Septiembre 2014Gold – Photo from Trek September 2014
Page 58
WES
T A
FR
IC
A
Page 59
24th April 2013 - Eastern Region, close to Armajaro sites in Jejeti and Asafo
Gold – Google Earth Images: BEFORE
Source: Google Earth
WES
T A
FR
IC
A
Page 60
27th December 2014 – Eastern Region, close to Armajaro sites in Jejeti and Asafo
Gold – Google Earth Images: AFTER
Source: Google Earth
WES
T A
FR
IC
A
-
20 000
40 000
60 000
80 000
100 000
120 000
140 000
Cocoa Farmer* Minimum Salary Operations Manager Project Manager Professor Fuel Handler
GH
C/Y
ear
Average Annual Salary in Ghana (GHC/year)
Page 61
Migración Urbana – Porqué el cambio?Urban Migration – Why the move?
*Assumptions: 5 hectares with yield of 400kg/ha.
Note: Purely income from cocoa. Most farmers will gain income from other crops
WES
T A
FR
IC
A
218 kg
309 kg
kg
50 kg
100 kg
150 kg
200 kg
250 kg
300 kg
350 kg
Within 5km of galamsey operations Outside 5km radius
Main crop yields and gold mining
Estudio sobre la Capacidad en GhanaGhana capacity study
62
WES
T A
FR
IC
A
A BLIP OR A START OF A DOWNWARD TREND ?
• Observed transfer of land to mining
• Not reversible
• Rivers polluted
• Soil contaminated
• Demographics of farmers suggest full rebound unlikely and trend might continue
• Loss of growth potential from the most reliable supplier and forward seller
63
WES
T A
FR
IC
A
LA SITUACIÓN en COSTA MARFIL empezando10/11CDI SITUATION SINCE 10/11
• Main driver of strong output is expansion of acreage in CDI
• Burkinabe origin farmers dominate cocoa farming
• They feel more secure since election and more willing to expand farms
• Increased plantings esp in NW and N – normally new land but sometimes replanting as a result of declining productivity of old farms
• Economics more attractive
• Introduction of fixed price for season enables farmers to plan ahead
• Sustained upward trend in price for 4 seasons
• Enforcement of fixed price has boosted farmer income esp for mid crop
• Increased use of fertilization on farms
• CCC have improved roads/access to markets
Page 64
WES
T A
FR
IC
A
Page 65
0%
5%
10%
15%
20%
25%
30%
1 to 5 6 to 10 11 to 20 21 to 30 31 to 40 40+
2013
2014
2015
Acreage share by age of plots
Estudio sobre la Capacidad en Costa de MarfilCôte d’Ivoire capacity study
66
WES
T A
FR
IC
A
Costa de Marfil – Empleo en AgriculturaCôte d'Ivoire – Employment in Agriculture
Page 67
10%
20%
30%
40%
50%
60%
70%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Po
pu
lati
on
(M
illi
on
s)
Source: IMF
% of Total Employment
WES
T A
FR
IC
A
68
0
200
400
600
800
1000
1200
2011-12 2012-13 2013-14 2014-15 2015-16
IVORY COAST FARMER PRICES CFA
WES
T A
FR
IC
A
14%17% 18%
24%
59%
71%
78%
92%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015
fertilizers pesticides
Pesticides and fertilizers usage
Estudio sobre la Capacidad en Costa de MarfilCôte d’Ivoire capacity study
69
WES
T A
FR
IC
A
CUESTIONES QUE ENFRENTA COSTA de MARFILISSUES/CONSEQUENCES FACING CDI
• Aging farmers
• Farms getting bigger causing increased demand for paid labor –much of it coming from families in north attracted by potential of having own farm - potential child labor issues
• Movement to cities by younger people – requiring more non-family labor – potential child labor issues
• Spread of Cocoa Swollen Shoot Virus
• Lack of high quality, high yielding planting material to rejuvenate farms
• Deforestation accelerated – rainforest largely destroyed
70
WES
T A
FR
IC
A
52%57%
64% 65%
0%
20%
40%
60%
80%
2012 2013 2014 2015
Swollen Shoot Infected Farms
Estudio sobre la Capacidad en Costa de MarfilCôte d’Ivoire capacity study
71
WES
T A
FR
IC
A
Page 72
73
•Conclusion
Page 74
• Demand continues to grow at 2-2.5% pa as global economy recovers from recession
• South America (particularly Peru & Ecuador), to continue expanding cocoa production
• Indonesia. Sulawesi might stabilize but Sumatra production will drop. Small farms, the price of land and competition from other activities are the impediments to growth
• No meaningful expansion elsewhere in Asia – land pressure, disease risk, urbanization
• Ivory Coast uptrend intact and strong because of new plantings but likely to fade as available land supply diminished.
• Ghana a huge question mark. The upward trend looks over. Can it stabilize around 800 kmt level in face of multiple problems?
75
SUPPLY AND DEMAND IN COCOA ARE SELF CORRECTING
• This is because there is no direct substitute for cocoa
• A tree crop which takes 3 years from planting to production
• Signals to increase production are conveyed by higher prices
• Similar to coffee, citrus, livestock, dairy and minerals
• Much slower than row crops and rice which have a lead time of just 6 months and are also grown in 2 hemispheres
76
• If we experience a supply problem prices will rise to ration demand
• However if prices rise too steeply or rapidly there is demand destruction until the supply becomes adequate again
• These tensions maintain the market in approx. balance
• There will be no 1 million ton deficit in 2020
77
La Oferta y la Demanda: Potencial para 2020S&D Potential Picture in 2020
Page 78
2500
3000
3500
4000
4500
5000
000s
to
nn
es
Production Grindings
Source: Armajaro Data
Equilibrio entre la Oferta y la DemandaS&D balance
79
-500
-400
-300
-200
-100
0
100
200
300
400
500
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000 Surplus/deficit Net production Grindings
SíNTESIS de la DEMANDA SUMMARY OF DEMAND
• Grind + 3.0% in 2013/14 as general economic recovery from 2008/09 financial crisis
• Over-capacity in cocoa processing so grind > final consumption leading to increased product stocks at end 2014
• 2015 factories have chosen to slow production and work off stocks as competition for sales has led to negative processing margins in most places
• Grind in 2014/15 est. - 3.2%
• Chocolate consumption in developed economies stable and near long-term average but weak demand in BRIC economies – CHINA, BRAZIL, RUSSIA
• Disappointing sales from over optimistic chocolate manufacturers eg Hershey, Mondelez
• Expect resumption of grind upward trend next year +3.5% as product stocks now low
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Dem
an
d
World grind: large rebound potential in 2015/16
81
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Actual grind growth
Model grind growth
Dem
an
d
FACTORES DE RIESGO a CORTO PLAZOSHORT TERM RISK FACTORS
• Weather has been benign for several years but some immediate risk ahead
• Drier than normal weather in W. Africa during summer will cut Ivory Coast crop sharply in 15/16
• Unanswered questions about Ghana’s future
• Indonesia already impacted by El Nino-very dry
• Ecuador –monilia present and could be widespread if rains in Q4 show similar pattern to previous EN’s
82
83
EL CLIMA WEATHER
84
COMPARISON – CENTRAL AND EAST pACIFIC
85
NOAA CPC MODEL
86
ECMWF MODEL
87
August
88
1982 Anomalies 1997 Anomalies
September
89
1982 Anomalies 1997 Anomalies
October
90
1982 Anomalies 1997 Anomalies
November
91
1982 Anomalies 1997 Anomalies
December
92
1982 Anomalies 1997 Anomalies
• Demand growth rebound in 15/16 after a poor year
• Balance in 2014/15 and deficit next a VERY high probability
93
Equilibrio entre la Oferta y la DemandaS&D balance
10/11 11/12 12/13 13/14 14/15 15/16
Gross tree crop 4,331 4,025 3,987 4,364 4,116 4,024
% change 19.20% -7.10% -0.90% 9.50% -5.70% -2.20%
Net tree crop 4,296 3,992 3,951 4,320 4,075 3,983
Grindings 3,947 3,947 4,094 4,219 4,084 4,227
% change 5.70% 0.00% 3.70% 3.10% -3.20% 3.50%
94
Equilibrio entre la Oferta y la DemandaS&D balance
95
10/11 11/12 12/13 13/14 14/15 15/16
Surplus / Deficit 349 45 -143 101 -9 -244
Stocks 1,640 1,685 1,542 1,644 1,635 1,391
Stocks to grindings ratio
41.60% 42.70% 37.70% 39.00% 40.00% 32.90%
Thank You
96