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Cocoa is a tropical crop found mostly in a zone that extends approximately 15 degrees north and 15 degrees south of the equator. Cocoa trees can attain a height of 35 feet and produce fruits known as pods. A mature cocoa pod is six to ten inches long and can contain 20-50 seeds or beans. In the course of a season, the cocoa tree produces thousands of flowers but only a very small number of pods. Flowers and pods are present on the tree throughout the year but at certain times are in greater numbers. Typically a large main crop is harvested to be followed by a smaller mid crop. After planting it takes about 5-6 years for the tree to become productive and peak productivity is reached in the tenth to eleventh year. Cocoa trees can remain productive for 50 years. The major production area for cocoa is West Africa where about 60 percent of the world’s cocoa is grown. The four major West African producers are the Ivory Coast, Ghana, Nigeria and Cameroon. The Ivory Coast is by far the world’s largest producer with a market share of 40 percent. Ghana is the next largest producer with about 15 percent market share. Outside of West Africa, other major producers of cocoa are Indonesia, Malaysia, Brazil, the Dominican Republic and Ecuador. A number of countries have been increasing their output. Brazil was a major producer and exporter of cocoa but disease has damaged their trees. In the 1999/2000 season, several countries whose prior crops had been damaged by El Nino have now recovered. As a result, world production in 1999/00 should increase. The U.S.D.A. forecast world cocoa production in 1999/00 (October-September) at 2.89 million tonnes, up just over 1 percent from the previous season. If realized, this would be the largest crop since the 1995/96 crop of 2.94 million tonnes. The Ivory Coast is by far the most important producer and exporter of cocoa. The U.S.D.A. forecast the Ivory Coast 1999/00 crop at 1.2 million tonnes, down 10,000 tonnes from a year ago and some 2 percent less than the record output of 1995/96. While the season is just getting underway in terms of harvesting, it has already been a tumultuous year. The Ivory Coast cocoa industry has been liberalized in that government control and influence has been removed. In the face of lower cocoa prices from a large crop, producers have banded together to protest the low prices by reducing the amount of cocoa that they would sell. This strike action was followed by a military coup which removed the government from office. There was no indication that there would be any changes in the cocoa industry. Prices responded to the developments by moving higher but then fell back. The U.S.D.A. forecast Ivory Coast exports at 1.03 million tonnes. One trend in the cocoa market has been for the producing countries to process more of their own crop and export value-added products. The U.S.D.A. forecast Ghana’s crop at 450,000 tonnes, up 5 percent from the previous season. This will be a large crop though it is well below the record 1964/65 crop of 566,053 tonnes. The larger crop this year is due to timely rains which can make a great deal of difference in determining the size of the crop. Ghana cocoa is considered to be high quality and the government takes steps to ensure that quality is maintained. The U.S.D.A. forecast that Ghana would export 400,000 tonnes of cocoa. The U.S.D.A. forecast Indonesia’s 1999/00 crop at 350,000 tonnes, up 4 percent from the previous year. The larger crop was due to favorable weather as well as new trees coming into production. Despite the recent economic crisis in Indonesia, the cocoa industry appears to be strong. The U.S.D.A. forecast exports at 280,000 tonnes, up 4 percent from the previous season. One country that has seen a steady decline in production is Brazil. The U.S.D.A. forecast the 1999/00 crop at 125,290 tonnes, down 21 percent from 1998/99. Because of damage from Witch’s Broom disease, production has been on the decline and shows no sign of recovering. Brazil, which had been a net exporter of cocoa for many years, is now a net importer. The U.S.D.A. forecast that Brazil’s imports of cocoa in 1999/00 would be 75,000 tonnes. World consumption or grind of cocoa for the 1999/00 season was estimated by E.D.&F. Man at 2.8 million tonnes, up less than 1 percent from the previous season. While cocoa consumption has been trending higher in recent years, recent data form the major consuming countries shows it has been close to flat. With world production of cocoa expected to exceed consumption, global cocoa stocks should increase by the end of 1999/00. Futures Markets Cocoa futures and options are traded on the CSCE Division of the New York Board of Trade (NYBOT) and on the London International Financial Futures and Options Exchange (LIFFE).

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Excerpted from the CRB Commodity Yearbook