United Cacao Ltd SEZC (LON:CHOC) Chief Executive Officer Dennis Melka caught up with DirectorsTalk for an exclusive interview to discuss the recent increase in cacao price
Q1: We noticed cacao price reached nearly $3,000 per tonne as of Friday, what do you think is driving this rally?
A1: It’s really a continued contraction of supply out of West Africa. Incredible news that came out Friday afternoon, the ICCO and some industry sources announced that they do not expect the mid-crop harvest to be as high as last year’s so this really is in line with the continued contraction of supply out of West Africa. So you’ve seen price, several weeks ago, hit a low of around 2,700 and now has rebounded very sharply to just under 3,000; $2,998.
Spot price is actually already above 3,000 so remember the five-year average price is about 2,800 and so we’re now treading back above that five-year price so I think in the context of really a commodity market globally that’s in serious troubles; oil price down, negative industry environment, you really see cacao as an incredible sector that’s outperformed all other commodities.
It’s really driven because the fundamental demand that’s out there from consumers around the world in Asia, in India, North America and Western Europe that keep consuming chocolate products irrespective of the economic circumstances so I think the price rebound is nice to see, I think this year’s harvest as we’ve been saying all along is going to be, most likely, another down year.
So this will be the fifth year of contracting supply out of West Africa, you effectively have West Africa peak in 2011, it has had declining production since that so we’re very excited about the market and I think the recent information out of the ICCO on Friday really buttresses United Cacao’s position and views that the market supply side continues to contract and it’s really a great future for cacao producers that are outside of the West African production zone.
