Euromonitor commodity talk: The highs, the lows and demands

Francisco Redruello, senior foods analyst at Euromonitor, provided insight on the global commodities market for February in the group’s monthly podcast,GlobalCast.​

Redruello noted that while cocoa bean prices were up 5% in February, it was too early to say if this was an indication of a steady recovery for this commodity, as stocks remain high.

“Ending stocks for the previous season were around 500,000 tonnes higher and it’s going to take some time to be absorbed by the market,” ​he said.

He added that it is unlikely there will be any price increases for cocoa until the third quarter of 2012, “once a significant part of the existing cocoa stocks has been absorbed by international cocoa grinders.”​

Cheaper coffee?​

Redruello said coffee prices are set to become cheaper “if not in the coming weeks, the coming months…because global demand is still relatively weak,”​ and there is an easing in consumption from emerging market economies.

Data from the International Coffee Organisation showed that world coffee exports fell by 0.7% for 2011.

“Official data released in the last week of February showed European coffee stocks to be down by 600 tonnes in December,”​ he added, and “if stocks continue declining in the coming months, we might witness a slow-down and decline of international coffee prices.”​

He added that this may not be the case for Europe however, “as higher confidence on the resolution of the EU debt crisis might speed economic growth and prompt steady recovery in prices over the coming months.”​

Western wheat​

Europe is also set to benefit from a geographical shift in Asia Pacific and Middle East sourcing of wheat, as wheat importers from these regions are turning their attention towards Western Europe and North American.

Redruello said this was “because countries like Ukraine have already exported a significant amount of wheat and seem to have exhausted, by large, their selling potential for the coming months.”​

He added that wheat grain prices are therefore not set to drop, certainly until June, due to these increased import demands from Asia Pacific and the Middle East.

Sweeter sugar prices?​

Sugar stocks remain high, Redruello noted, and there has been a 7% rise in sugar prices since the beginning of February.

This has been driven by a weak output from major sugar-player Mexico, combined with a cheaper, weaker dollar, he said.

He noted that Mexico’s output for the 2011/2012 season was down 12%, and the value of the dollar declined by 60 points between February 1 and February 27.

Over the coming weeks, Redruello said that the price of sugar futures may creep up due to concerns on sugar production in China, as government projections seem to outstretch the likely production numbers following inspections on the ground.

He added however, that prices are unlikely to get much more expensive than 26 cents to the pound though, due to weak economic growth in developing economies.