Cocoa Beans, Cobalt, and The Drama Surrounding Orange Juice Concentrate

Spend Matters welcomes a guest post from Nick Peksa of Mintec Ltd.

This week I thought I would directly plug the information available on the Mintec website -- Feel free to register with us if you would like some more regular news stories like the ones below.

Cocoa Beans (London)

The price of cocoa beans (in terms of GBP) has risen by 12% since the start of the year but is down by 22% year-on-year from the high prices seen during the Ivorian civil war in 2011.

Cocoa futures rose recently in the biggest two-day gain in almost eleven years after a nationwide strike affected production in Nigeria, the world's fourth largest cocoa producer. There were worries also after dry and windy weather caused concern about cocoa production in the Ivory Coast. Recent cumulative figures suggest Ivorian output is down 3.5%, year-on-year.

Orange Juice Concentrate (US)

The price of orange juice recently surged after reports of cold weather in Florida raised fears that there was a risk of damage to Florida's orange crop. There were also safety concerns after the USDA was reported to have found a fungicide -- carbendazim -- in shipments of the juice from Brazil. Carbendazim is legal for use in Brazil but is illegal for use on oranges in the US and EU.

Prices fell back relatively quickly, however, after the EU failed to halt Brazilian orange juice imports stating that tests showed its juice from Brazil remained safe.

Cobalt (R'dam)

The price of high-grade cobalt in Rotterdam (in terms of USD) has fallen by 14% year-on-year. Cobalt is a metal with many, diverse uses, but in comparison to other industrially important metals it is not often used in particularly large amounts.

Its leading use is in rechargeable batteries, but it is also found in small amounts in numerous alloys, paints, varnishes, inks and dyes. Prices for cobalt are currently historically low due to an excess of supply. Cobalt tends to be produced as a by-product of nickel or nickel/copper mining and the high prices of these other metals in recent years has encouraged their increased production, creating more cobalt as a by-product and thereby reducing its price. In 2010 Congo was the main global producer of cobalt (with 51% of the world's supply), followed by Zambia (12.5%), China (7%) and Russia (6.9%). The Congo has by far the largest cobalt reserves, with 3.4m tonnes (47% of those currently identified), followed by Australia with 1.4m tonnes (20% of current world cobalt reserves).

Honge/Karanja oil (IN)

The price of honge/karanja oil in India has risen by 50% year-on-year. Honge oil is a traditional lamp oil in Asia, also commonly used in leather tanning, soap making, and as a lubricant. Its bitter taste and disagreeable odor, which can induce nausea and vomiting, makes honge oil an inedible oil.

Indian Rupee vs. USD

The value of the Indian Rupee vs. the USD has fallen by 16% year-on-year and is almost at a record low. The Indian rupee has been weakening since around the middle of 2011 due to a number of concerns. The Eurozone crisis has led to a flight of foreign capital from emerging markets and there are worries about India's fiscal deficit and current account.

There are also concerns about India's growth outlook after industrial production was recently reported to have fallen 5.1% in October 2011 compared to October 2010. This was the first fall in Indian output in more than two years and a far greater month-on-month decline than was previously expected. India's manufacturing output, which accounts for around three quarters of India's industrial production, was reported to have fallen by 6% in the month of October, while capital goods production fell by 25.5%.

Shelved plans to open India's USD 450bn retail sector to foreign investment also recently caused concern since it was hoped that this plan for retail reform would re-energize the Indian economy. The Reserve Bank of India is currently tackling record high inflation via a policy of raising interest rates. These have been increased 13 times since March 2010, but although food inflation was recently reported to have eased to 6.6%, overall inflation in India remains stubbornly high at above 9%.

-- Nick Peksa, Mintec Ltd.

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