The cocoa market Tuesday paused to reflect on recent developments.
Most traders were content with selling into the market after recent modest
gains. In New York futures ended a quiet day $6 to $9 lower after holding support around $1,240, basis September.''If we hold above $1,240, we might be good for a bit of a rally," a floor trader said.
"The market has been very, very slow. In fact, this has been one of the quietest days of the past six months," another trader said. The market seems stuck in the a modest trading range. "Manufacturers have pulled out of the market and there is little trade business, and most of the volume is local activity."
In general, the cocoa market appeared to have absorbed and discounted news that the Soviet Union sold more than 20,000 tons of cocoa back to the trade. The news caused a flurry of activity last week.
Given the fact that cocoa surpluses continue to weigh the market down and the political situation in the Ivory Coast has eased, cocoa market traders are pausing to assess their next move. They are also waiting for new crop-related developments from cocoa producing countries.
Weather is playing an important part on trader sentiment. Recent favorable weather in Brazilian and West African growing regions put a damper new buying in the futures market, analysts said.
In related news, cocoa producers who are heavily dependent on cocoa foreign exchange earnings have expressed strong interest in becoming cocoa processors.
Ghana and the Ivory Coast both supported the idea of extending their role in marketing cocoa by becoming processors.
Mamah Mohammed, Ghanaian chairman of the International Cocoa Organization's executive board said Tuesday in Accra, Ghana, that producers and consumers should form joint ventures to process cocoa at origin to redress the disparity in the world cocoa economy.
He was speaking during the discussions here of the advisory group meeting of the organization, know as the ICCO.
''Consumers are in control of the world cocoa economy. They control shipment, insurance, marketing processing and distribution of cocoa products. Producers must be given the opportunity to have a fair share of the world cocoa economy through processing," he said.
Mr. Mohammed, who is also the managing director of Ghana's Cocoa Marketing Company, added: "We must think seriously of developing markets, then go the full hog in processing. We need to go beyond (the) primary processing stage." But he added that developing new markets will take time.
Producers who are less dependent on cocoa, such as Malaysia, were less enthusiastic. Mohammed Musa Jami, Malaysian Cocoa Board delegate, said Malaysia does not favor processing at origin because of the heavy investment needed to provide the infrastructure for processing.
Consumers took the view that processing at origin is a costly and risky venture.
One representative of a European cocoa user said processing at origin in Africa is risky because of the poor investment climate coupled with unrealistic political manipulations. His company invested in a processing plant in the Ivory Coast but had to dispose of it at a loss for political reasons, he said.