Turmoil, tight supplies give coffee, cocoa prices strong flavor

Cocoa and arabica coffee futures rose to the highest levels in more than three decades on London's ICE exchange yesterday, with cocoa driven by turmoil in top grower Ivory Coast and coffee by tight supplies of high quality beans.

Cocoa futures have been rising as the crisis in Ivory Coast has shut down international banks and led to a virtual halt in exports.

Ivorian troops killed at least six protesters who were calling on Laurent Gbagbo to step down as leader on Monday, witnesses said, as African presidents charged with resolving the crisis met the incumbent in Abidjan.

"The situation is not getting any better," said Kona Haque, commodity strategist at Macquarie Bank. "I think the risks are rising for short-term supply disruptions."

May cocoa futures on ICE stood US$38 or 1.1 percent higher at US$3,537 a tonne after rising earlier to a 32-year peak for the second month of US$3,574.

Prices on Liffe also advanced, with May up 28 or 1.2 percent at 2,314 a tonne.

"There's a big risk of the ban being extended into the mid-crop," Haque said. Coffee prices have doubled since June 2010, with supplies tightened by three consecutive below-par harvests in Colombia, the world's top producer of high quality washed arabica beans.

"Physical [coffee] prices are still very strong, and Brazil is in no rush to sell," Haque said.

"A good chunk of the farmers are pretty much sold out anyway."

May arabica futures stood 2 cents or 0.7 percent higher at US$2.75 per pound. The aribica contract earlier peaked at US$2.78 per pound, the highest level for the second month in more than 30 years.

(Source: http://www.thestandard.com.hk/news_detail.asp?pp_cat=5&art_id=108397&sid=31395328&con_type=1&d_str=20110223)