Cocoa Q for frederic

mondongo

Bronze
Jan 1, 2002
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Frederic, I read in the DR1 daily news that cocoa revenues increased significantly over the last year mainly due to the doubling of the open market price of cocoa. Conversely, the year beofre that, cocoa prices fell by about 40% and the revenues must have suffered accordingly (i am ignoring currency translation). Are the growers aware that they can hedge the risks associated with price fluctuations in the futures markets? Do you know to what extent, if any, they employ such hedging?


thanks, mondongo
 

frederic

DR1 Expert
Jan 1, 2002
93
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Cocoa question

I am not an expert on agro issues, but I know there is no futures market as we know it in Cocoa. What some producers do in this an other crops, they sell thier crop "in flower", which means that they sell it when the plants flower to assure a price, no matter what happens, but usually the price is so low, they either win very little profits is any at all.
 

mondongo

Bronze
Jan 1, 2002
1,533
6
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cocoa futures

Frederic, there is a futures market based in NY that trades a sufficient volume to hedge nearly the entire DR yearly crop. There is also a futures market in london (liffe.com).

http://www.nyce.com/

As Shadley000 mentions, an important question is how correlated the export price for DR cocoa is the the NYC and London (liffe.com) markets.

When someone buys the "flowers", what percentage do they ususally pay, assuming an average crop yield?

thanks again,
mondongo
 

frederic

DR1 Expert
Jan 1, 2002
93
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Don't Know ---- Finding Out

I don't know the answer but I have forwarded the question/issues to a friend and hopefuly he'll get back to this board soon.
 

Escott

Gold
Jan 14, 2002
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www.escottinsosua.blogspot.com
Re: Don't Know ---- Finding Out

frederic said:
I don't know the answer but I have forwarded the question/issues to a friend and hopefuly he'll get back to this board soon.

I want to thank you for your frankness. Not knowing is not a crime but not knowing and bs'ing is. Thanks for taking the time to find out the answer for him. This board is truly a great resourse and I want to thank you for your part in it.

Regards,
Scott