NEW YORK/LAGOS, May 14 – Cocoa dealers are snapping up West African beans for import to the United States, according to trade sources, as they seek to profit from the steepest premium for the chocolate ingredient in over 40 years in the New York market.
A jump in U.S. cocoa imports from West Africa would narrow that rare premium, which has been widening since late 2017 when a large volume of old or low-quality cocoa supply from Cameroon hit the European market.
The differential between the two international trading hubs grew further when New York saw tightening supplies of higher quality beans as cargoes from Ecuador were rejected by U.S. customs because they were contaminated with a noxious weed.
U.S. futures prices rose to a premium of roughly $240 to London futures by May 1, the highest since 1977.
That sparked a rush by trade houses to import a larger-than-normal volume of cocoa from West Africa, traders said. Imports have yet to show in U.S. trade data, which is only available through March.
More recent U.S. inventory data from the Intercontinental Exchange (ICE), reported by warehouses licensed to store cocoa, shows stockpiles of the bean have risen 33 percent to around 5.3 million bags since November. That would indicate the arrival of more imports, likely to show up later in monthly trade data.
Inventories are still down 5 percent from a year ago, ICE data shows.
Nigerian commodity exporter Starlink Global has seen rising demand for cocoa exports to the United States, said Nasir Hassan, a director for the company in Lagos.
Hassan said he is selling through brokerage firms in Europe, and that big global trading houses such as Sucres & Denrees (Sucden) and Touton Group had placed orders for shipments to the United States.
Sucden declined to comment on trade strategies and Touton did not respond to a request for comment.
Starlink has exported around 2,000 tonnes of cocoa to the United States so far in the 2017/18 crop year that started in October, which is already more than the 1,500 tonnes exported during each of the previous two years.
The company expects its cocoa exports to the United States will rise further before the season ends, Hassan said.
“Right now, everyone’s racing to bring cocoa here,” one U.S.-based trader said. The premium was so wide that the trader, who has for 20 years dealt solely in futures contracts, said he was for the first time seeking to book a cargo of West African beans for import.
“New York being at such a premium inevitably has attracted a lot of West African cocoa,” said one European dealer, adding that this could tighten supply of good quality West African cocoa in London and Europe.
“And you would think the markets would begin to correct themselves, but that hasn’t materialized.”
The U.S. cocoa premium hovered around $165 on Monday, with New York July cocoa futures trading down around $2,780 per tonne and London July 1,925 pounds per tonne, not far below 2016 highs reached in recent weeks.
One trader at a midsize exporter in Nigeria said it continued to send cargoes to Europe rather than attempt to ship to the United States because of the additional paperwork involved in shipping across the Atlantic.