You could read this a number of ways, but it looks bullish for cocoa. If the ivory coast beans are low quality and the industry buyers want high quality they have to do as the man says "pay up"
Max
HAMBURG, May 30 (Reuters) - European physical cocoa business remained depressed this week with the sudden rise in London futures on Thursday putting a stop to limited fill-in purchases which had been made in previous days, traders said. London September cocoa futures peaked this week at 1,465 pounds per tonne on Thursday, a two-week high. 'London remains way above the level most industrial customers are willing to pay and London's sudden jump on Thursday took away the purchase interest for spot hand-to-mouth delivery,' one trader said. Differentials were generally little changed. Ivory Coast beans were again quoted substantially lower than other West African origins because of continued quality concerns about the Ivory crop.
Beans from Ghana were quoted on Friday at 140 to 145 pounds over London's July bean contract against 30 to 40 pounds over for Ivory beans. 'Ghana remains in the focus of interest for the large industry players who need big volumes of good quality to replace Ivory supplies while the state Ghana board is also willing to make large advance sales,' one trader said. The trader said that there was underlying physical interest in other origins such as Nigeria and Cameroon, but these countries don't have the physical volumes the big players need. 'But West African sellers are acutely aware of the quality problems in Ivory Coast and buyers who need guaranteed quality must pay up,' he added. Otherwise many industrial buyers were thought to again be running down inventories in the hope London prices will fall. 'I believe industry does have a large pent-up requirement,' one trader said. 'I think there would be major purchasing if London July was to fall by about 150 pounds.' He noted that background fundamentals are bearish and industrial buyers are still hoping for reduced investment fund interest in cocoa.
The global cocoa market should move into surplus in 2008/09 from a small deficit in 2007/08 as high prices stimulate production, the head of the International Cocoa Organization (ICCO) said this week. [ID:nL27735756] (Reporting by Michael Hogan; editing by David Brough and Peter Blackburn)
