ICCO cocoa organisation expresses concerns over global market impact of Ukrainian conflict
Luker's cocoa cultivation in South America
The ICCO International Cocoa Organisation has expressed concerns regarding the Ukrainian conflict’s impact on its own agricultural sector, with crops and as well as valuable fertiliser supplies impacted by the situation, reports Neill Barston.
With Russia facing severe economic sanctions from Western nations over its invasion of its Eastern European neighbour last month, the global food security of a number of key products including wheat and grain also face significant disruption.
According to the ICCO in its latest monthly bulletin, imports of cocoa beans and semi-finished products to Ukraine amounted to 40,000 tonnes in cocoa beans equivalent in 2020/21) and to the Russian Federation (165,000 tonnes in cocoa beans equivalent). It said these are expected to decline in the rest of 2021/22 season owing to the ongoing conflict between the two nations.
Furthermore, the organisation noted that trade disruption in Russia could affect global fertiliser availability and consequently global agriculture including cocoa production. It noted that Fertiliser trade will be affected as sanctions imposed on the Russian Federation and Belarus such as banking restrictions would hamper the payment of fertiliser sales. This is anticipated to affect cocoa smallholders who are already struggling with high prices of fertilisers will be unable to afford them.
Crucially, the ICCO added that the global cocoa market was weaker in February in reaction to concerns that the war in Ukraine and the subsequent economic sanctions announced by the West could cause a strong increase in prices of Russian-led commodities, including crude oil and gas, which in turn could negatively affect the global economy.
In its monthly bulletin, the cocoa body conceded that it was ‘difficult to evaluate’ the full impact of the conflict in Ukraine due to the fact that it has potential wide-ranging economic consequences.
This was reflected by turbulence in the futures stock market commodities prices for cocoa in both New York and London. Despite some early February optimism over dry weather in West African nations of Ghana and Ivory Coast in February positively influencing crop prices, global prices of the front-month cocoa futures contract were notably affected. They averaged US$2,345 per tonne, down by 5% compared to the average price of the nearby contract (US$2,467 per tonne) recorded at the same period of the preceding crop year, and ranged between US$2,203 and US$2,461 per tonne in London. According to the ICCO, on the New York exchange, the average price of the nearby contract settled at US$2,636 per tonne, up by 3% compared to the average price of US$2,568 per tonne recorded in February 2021.