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Fair trade cocoa could protect against price volatility, analyst

20-Aug-2010

Opting for fair trade cocoa could be one way for food firms to protect themselves against price volatility for the commodity, according to an industry analyst.

“It’s difficult to say how producers could insulate themselves from cocoa price fluctuations caused by the market, given that cocoa is a commodity like any other. But fair trade cocoa is not indelibly linked to the markets, and the Rainforest Alliance ensures a price that is sustainable – for farmers,” said Francisco Redruello, senior food analyst at Euromonitor International and author of a recent report on cocoa prices.

In July this year, prices for cocoa beans hit £2,465, the highest in 32 years. Two weeks ago, prices fell to a three-month low in London, with a pending improved September harvest from the Ivory Coast (which supplies 40 per cent of the world’s cocoa) of 1.3m tonnes a major contributing factor.

Redruello suggested that this volatility is largely due to hedge funds attracted by quick returns taking short-term positions on the commodity. However, fair trade is not affected by these positions, he told ConfectioneryNews.com.

“Buying fair trade would insulate confectionery manufacturers from the vagaries of the market given that speculators are not really attracted to it, as a niche sector where massive returns are not possible due to fixed prices. There’s more certainty about final price and therefore forward planning from a production point of view, but of course the problem is that it’s a very small market at the moment.”

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