Es real el deficit de 1 millon de toneladas en el 2020?

Guayaquil , Sept 02 2015

Pamela Thornton Armajaro Asset Mgmt

Es real el deficit de 1 millonde toneladas en el 2020?1 million ton cocoa deficit. Fact or Fiction?

Disclaimer

• Source of data: Armajaro, unless otherwise stated. The fund(s) mentioned herein are exempted companies incorporated with limited liability in the Cayman Islands as an open-ended

investment company. The Fund is an unregulated collective investment scheme for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (the “Act”). The

promotion of the Fund and the distribution of this document in the United Kingdom is accordingly restricted by law. Shares in the fund are not available for sale in any state or jurisdiction

in which such sale would be prohibited. Please note, the fund has not been registered, nor will be registered, under the U.S. Investment Company Act of 1940, as amended, or the Securities

Act of 1933, as amended, and may not be sold directly or indirectly in the U.S. or to a US person.

• The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. No reliance may be placed for any purpose on the

information or opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or

completeness of the information or opinions contained in this document by Armajaro Asset Management LLP or its members or employees and no liability is accepted by such persons for

the accuracy or completeness of any such information or opinions. The contents including details of any research, investment strategies and any bespoke financial products are confidential

to the person to whom it is delivered and should not be copied, distributed, or disclosed, in whole or in part, to any other person without our prior consent. Past performance is not

indicative of future performance.

• This document does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any Shares nor shall it or the fact of its distribution form

the basis of, or be relied on in connection with, any contract therefore. Recipients of this document who intend to apply for Shares following publication of the prospectus by the Fund are

reminded that any such application may be made solely on the basis of the information and opinions contained in the prospectus which may be different from the information and opinions

contained in this document.

• In the United Kingdom this document is issued and approved by Armajaro Asset Management LLP (authorised and regulated by the Financial Services Authority and registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser under the Investment Advisers Act of 1940), 16 Charles Street, London, W1J 5DS. The fund is not regulated under the Financial Services and Markets Act 2000 (the Act) and consequently no protection is provided by the UK regulatory system. Similarly, benefits available under the UK Financial Services Compensation Scheme do not apply. This document is only intended for distribution to persons permitted to receive it by Section 238 of the Act and is intended for distribution to Professional Clients

• The views expressed are those of the manager at the time of publication and are subject to change.

All data as at 30 March 2012 unless otherwise stated.

•CMAA•ARMAJARO

3

RESUMENSUMMARY

• The 1 mil ton in 2020 deficit projection – La proyección del déficit de 1 mil toneladas en 2020

• Price Determinants – Factores Determinantes de Precio

• Short Term Price Drivers – Factores de Precio Corto Plazo

• Long Term Structural Changes – Cambios Estructurales a Largo Plazo

• Current Demand – Demanda Presente

• Current Supply – Oferta Presente

• Conclusion - Conclusión

SLIDE FROM WCF PRESENTATION 2010

• By 2020 we are going to need at least 4.5 mil tons pa to satisfy projected demand for cocoa

• This equates to 900 kmt pa more than we produced in 2009/10 or 700 kmt more than projections for 2010/11

• Where is the cocoa required to satisfy this future demand going to come from?

Oferta y Demanda 2020 – Noticias Destacadas de

Noviembre 20142020 S&D Picture – Headlines in November 2014

* ICCO statement 21st November 2014

Bajos/Pobres Recursos Macroeconónomicosy GlobalesGLOBAL COCOA MACRO ECONOMIC RESOURCES

• No major governmental organization provides cocoa data because cocoa is not considered a “strategic” food

• ICCO is a government to government organization. Produces the best production/stocks info in the public domain

• But ICCO data is essentially backward-looking research with a political component. Have to accept production and demand numbers provided by individual country members egIndonesia, Ghana

• Key producers lack the financial resources to conduct an inventory of the area under cocoa , planting density, age profile of trees etc. Little idea about their crop

• The cocoa industry spends millions on sustainability conferences and programs, has done constructive scientific work such as mapping the cocoa genome etc. but has no inventory of global cocoa resources from which to derive a baseline for any forward planning

• Little money available for the provision of statistical research

• Approx. 10 private companies conduct their own global field forecasting exercises. Secretive.

8

LOS RIESGOS de SER PRODUCTIR DE CACAORISKS OF BEING A COCOA FARMER

• Weather and war

• Pests and disease

• Biggest risk to commercial planting is PRICE

• Since Jan 2008 global cocoa prices have been above $2000/mt

• But you are operating in an area with no government price supports

• With little independent research about supply and demand in the future

• And you produce a single use commodity

9

FACTORES DETERMINANTES DE PRECIOPRICE DETERMINANTS

• Caution needed

• Volatile commodity

• Short-term – speculative money flows

• Long-term – structural change

• Medium-long term – cocoa supply and demand

• Impact softened by ability to store goods at point of consumption

10

PRECIO del CACAO: VOLATILIDAD HISTORICACOCOA HISTORIC PRICE VOLATILITY

• 1970s period of high food price inflation

• July 1977 record cocoa price - $5368/mt

• In real terms today = $21140

• 1979 CDI refused to participate in international cocoa agreement as price was too low – claimed cost of production $1.86 = $4100

• 1992 = $790

• 1997 = $1750

• Dec 2000 = $674 before political instability in Cote d’Ivoire caused major price adjustment

• Since 2004 lowest price is $1300/mt

• Peaks $3775 during CDI civil war and $3350 Ebola crisis11

CORTO PLAZO: FLUJOS ESPECULATIVOSSHORT-TERM: SPECULATIVE MONEY FLOWS

• Recent events a good example

• 2013/14 global ending cocoa stocks estimated at around 1.5 mmt

• Equivalent to 150k lots

• Managed money = immediate short-term speculative risk

• Collated from COTs London and NY

• A - Sept 2014 = 1.42 mmt or 95% of world stocks

• B- March 2015 = 0.72 mmt or 48% of world stocks

• C -July 2015 = 1.50 mmt or 100 % of world stocks

• D -25 th August they held 0.83 mmt =55% of world stocks

12

Precio – Sept 14 a la fechaPrice – Sept 14 to present

13

2850

3350

2700

3386A

B

C

D

+1.75 mmt

+0.72mmt

+1.56mmt

+0.94mmt

A LARGO PLAZO: CAMBIOS ESTRUCTURALS la DEMANDA lo REQUIERELONG TERM: STRUCTURAL CHANGES DEMAND SIDE

• Changes in eating habits eg health concerns

• Opening up of new markets for chocolate eg Asia

• Move from local shops to supermarkets – from local products to international brands typically upgrades quality

14

Dem

an

d

CAMBIOS ESTRUCTURALES a LARGO PLAZO: la dinámica de LA OFERTALONG TERM: STRUCTURAL CHANGES SUPPLY SIDE

• Climate change

• Aging trend of cocoa farmers globally

• Urbanization – the move to the cities

• Wars

• All helpful for price

• New market participants on large scale

• Negative for price

15

PR

OD

UC

TIO

N

CAFÉ Y EL CASO DE VIETNAMCOFFEE AND VIETNAM EXAMPLE

1981/82

• Global coffee production =98.9 m. bags

• Brazil #1 = 34.6 m. bags

• Colombia #2 = 12.9 m. bags

• Robusta #1 Indonesia = 5.7 m. bags,

• Robusta #2 Ivory Coast = 4.2 m. bags

• Vietnam produced just 80,000 bags

2000/01

• Global coffee production = 116.4 m. bags (+17%)

• Brazil #1 = 35.0 m. bags but now #2 robusta producer = 7.6 m. bags

• Vietnam # 2 = 15.3 m. bags

• Colombia #3 = 10.5 m. bags

16

PRICE IMPACT

1981/82

• 1982 arabica price

• = 127.50 cents/lb

• = $2810/mt

• 1982 robusta price

• = 98.23 cents/lb

• = $2165/mt

2000/01

• 2001 arabica price

• = 93.77 cents/lb

• = $2068/mt (-26%)

• 2001 robusta price

• =40.14c/lb

• =$884 (-59%)

17

Producción en Vietnam comparada con Costa de MarfilVietnamese Production Compared to the Ivory Coast

0.00

5.00

10.00

15.00

20.00

25.00

30.00

90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15

M. 6

0 k

g b

ags

Crop Year

Vietnam Ivory Coast

18

1984-1992 – UNA HISTORIA MUY SIMILAR CONS CACAOSIMILAR STORY IN COCOA 1984-1992

• In 1983/84 a Super El Nino

• Widespread climatic problems

• Drought in South Sahara

• Food crops in W Africa suffered

• Starving Burkinabe and Malians moved south to Cote d’Ivoire

• CDI had an open doors policy - huge influx of immigrants

• Cocoa prices high 1983-85 – approx.$2800/mt

• Chopped down rain forest and started to grow cocoa

• As crop expanded - prices began prolonged collapse

• CDI crop grew from 411kmt (83/84) to 750kmt (1990/91)

19

LA ECONOMIA DEL SECTOR CACAOTERO EN AFRICA OCCIDENTALECONOMICS OF COCOA PRODUCTION IN WEST AFRICA

• Land free

• Once planted - ongoing production - 30 years+

• “Lazy Man’s Crop”

• Lack of alternative employment

• No capital to switch to other crops - cost of planting/delay to harvest

• Major physical effort to switch – many hours of labor

• No motivation unless trees dying

• Production price elasticity very low when prices weak

20

• Non-economic farmers make life very difficult for competitors

• Especially if they are big

• Don’t forget the Ivorian farmer can be motivated

• Will expand production when prices are strong

• New plantings

• More inputs

21

•Cocoa Demand

Dem

an

d

Tendencias de Oferta – Fuerte Lazo Histórico al PIBDemand Trends – Strong Historical Link to GDP

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Armajaro Grind Model

Grind growth forecast Grind growth actual

G7 PP GDP Growth/dollar index/sterling index

Source: Armajaro

Dem

an

d

Tendencias de Oferta – Fuerte Lazo Factores MacroDemand Trends – Strong Link to Macro Factors

60

65

70

75

80

85

90

3400

3500

3600

3700

3800

3900

4000

4100

4200

2005 2006 2007 2008 2009 2010 2011 2012 2013

Cocoa Grind Vs US New Car Sales

Cocoa Grind New Car Sales

40

42

44

46

48

50

52

54

56

58

60

3400

3500

3600

3700

3800

3900

4000

4100

4200

2005 2006 2007 2008 2009 2010 2011 2012 2013

Cocoa Grind VS Chicago PMI Index

Cocoa Grind PMI Index

2 000

2 500

3 000

3 500

4 000

4 500

20 000

25 000

30 000

35 000

40 000

45 000

50 000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Mil

es d

e m

illo

nes

Grind Vs Global GDP

Grindings Global GDP (Constant 2000 US$)

• Well-established demand trends have

maintained their relationships over decades

Source: Armajaro/World Bank/IMF

Dem

an

d

2014/15: desconexión entre el molido mundial y el PIB World grind: 2014/15 disconnection from GDP growth

25

2 000

2 500

3 000

3 500

4 000

4 500

10 000

15 000

20 000

25 000

30 000

35 000

40 000

World GDP

World grind

Dem

an

d

-$103

-$428

-£145

-£10

£1£13

-£308-£296

-450

-400

-350

-300

-250

-200

-150

-100

-50

0

50

Indonesia Malaysia Hamburg ADM/Cargill Nigeria Ghana mid Ghana main CDI

Márgenes del Procesamiento: números negativos a nivel globalProcessing margins: negative across the world

26

Dem

an

d

Molido annual: crecimiento desde 1961World grind: annual growth since 1961

27

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Dem

an

d

Molido annual: oferta en 2020World grind: demand in 2020

28

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

Dot-com bubble/subprime mortgage crisis

Global financial crisis

2014/15 disconnection

Dem

an

d

Consumo Aparente: 2020Apparent consumption in 2020

29

0

1 000

2 000

3 000

4 000

5 000

6 000

Developed countries Developing Countries

Dem

an

d

DEMANDA A LARGO PLAZOLONGER TERM DEMAND

• Cocoa grind forecast to rise by 991 kmt between 2010 and 2020 to 4.702 mmt

• Necessary to split developed and developing country trends

• Developed countries consumption has grown at an average rate of 1.6% over the last 20 years

• Developing countries have been growing faster, at + 4% but less stable as chocolate consumption not embedded in diet

• Developing economies consumed 19% of cocoa in 2010

• By 2020 estimated to consume 27% of production – population growth and eating habits copied from West

• Using different trends for developed and developing countries, apparent consumption is projected to rise by 1.025 mmt from 09/10 to 4.655 mmtin the 19/20 season.

30

Dem

an

d

AMENAZAS A LA DEMANDATHREATS TO DEMAND

• Negative media attention alienating especially younger customers – child labor, de-forestation, obesity

• Changing dietary habits – less sugar, less calories, smaller bar sizes

• More emphasis on health/nutrition bars – perhaps with lower chocolate content

• Switch to alternative/cheaper snacks – chips, cookies

• Switch to higher quality/more expensive/dark chocolate consumed in lesser quantity

31

Dem

an

d

•Oferta: El Pronóstico

•Supply Outlook

PR

OD

UC

TIO

N

•Cocoa production has continued to follow an upward trend of approx. 2% a year

•Strongest global crop on record was in 2013/14, at 4.364 mil.mt

• Increased production primarily due to new plantings in CDI and Ecuador

•Can cocoa production continue to expand at this rate?

PR

OD

UC

TIO

N

Producción Global de Cacao: 1984-2015Global Cocoa Production 1984-2015

1000

1500

2000

2500

3000

3500

4000

4500

000’

s to

nn

es

Global Production

Lineal (GlobalProduction)

Source: Armajaro

PR

OD

UC

TIO

N

Tendencias de Producción por ContinenteProduction Trends by Continent

35

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

Africa Asia Latin America

PR

OD

UC

TIO

N

Tendencias de Producción: base 100 en 1983Production trends: base 100 in 1983

36

0

50

100

150

200

250

300

350

400

450

500 Asia Africa Latin America

Witches Broom

Decline of Malaysia disease

Consistent upward trend?

PR

OD

UC

TIO

N

Tendencias de Producción – Orígenes PrincipalesProduction trends – Major origins

37

0

250

500

750

1 000

1 250

1 500

1 750

2 000 Côte d'Ivoire Ghana Indonesia Brazil Ecuador

PR

OD

UC

TIO

N

Precio pagado al producer Farmgate prices

38

$0

$500

$1 000

$1 500

$2 000

$2 500

$3 000

$3 500

$4 000

$4 500 Côte d'Ivoire Ghana Brazil Ecuador

PR

OD

UC

TIO

N

Precios Futuros – Performance desde Marzo 2010Futures Prices – Performance Since March 2010

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

130%

150%

Palm Oil Rubber Orange Juice Rice Cotton Cocoa

Only cocoa has higher

futures prices in Jan 2015

compared to 5 years ago

but marginal

Source: Reuters

PR

OD

UC

TIO

N

•1. Indonesia

IN

DO

NEIS

A

• Indonesia remains 3rd largest cocoa producer, but trend is downwards as farmers move into palm oil and rubber

• Farmers have battled with diseases and aging trees

• Small plot size - <1 ha

• Production has dropped for 6 consecutive years

• Farmers have the ability to modernize their farms

• Prices are good and closely track the world market

• But competing economy activities are the risk to cocoa

• Children do not want to take over farms

41

IN

DO

NEIS

A

Indonesia – Tendencia Estructural or Temporaria? Indonesia – Structural Downtrend or Temporary?

0

1

2

3

4

5

6

7

1980 1985 1990 1995 2000 2005 2010

Mil

lio

ns

Acr

es

Acreage

Cocoa, beans Oil, palm fruitRubber

0

5000

10000

15000

20000

25000

30000

35000

40000

1980 1985 1990 1995 2000 2005 2010

00

0’s

to

nn

es

Palm Oil Production

0

100

200

300

400

500

600

1980 1985 1990 1995 2000 2005 2010

00

0’s

to

nn

es

Cocoa Production

Source: Armajaro Data/ World Bank

0.9

1.0

1.0

1.1

1.1

1.2

1.2

1990 1995 2000 2005 2010

Mill

ion

Sq

. Km

Rainforest Area

IN

DO

NEIS

A

Palma de AceiteOil Palm

Expansion of acreage in Indonesia

• Oil palm needs a rainforest climate

– high humidity and temperatures

– therefore a lot of plantations are

established at the expense of

rainforests

• Major importers include India,

China and the EU

• Fundamentals are good, with

demand forecasted to increase as

many developed economies shift

away from the use of trans-fasts to

healthier alternatives

• Strong demand also coming from

biofuel and energy sectors

Source: GreenPalm

IN

DO

NEIS

A

Comparación de IngresosIncome Comparison

700

720

740

760

780

800

820

840

Cocoa Coffee Rubber Oil Palm

US

$ p

er h

ecta

re p

er y

ear

Net Income Potential for Different Smallholder Crops

3-5 years 4-6 years 10+ years 3-7 yearsLag between

planting and

positive cash

flow

Sources: Indonesia, A business case for sustainable coffee production

IN

DO

NEIS

A

•2. South America

SO

UTH

AM

ER

IC

A

0

50

100

150

200

250

300

350 Brazil Ecuador Peru

Patrones de Producción: Ecuador vs. Brazil vs. PeruProduction trends: Ecuador vs. Brazil vs. Peru

46

SO

UTH

AM

ER

IC

A

0

50

100

150

200

250

300

350

400

450

Brazil

47

Diseases account for losses of more than 30% of the potential crop each year.

Brazil suffered an outbreak of witches broom in the mid 90s.

Actively using CCN51 and equivalents and seeking more disease resistant/tolerant

planting material.

SO

UTH

AM

ER

IC

A

PRODUCCIÓN en ECUADOR: 1990/91 - PRESENTEECUADOR PRODUCTION 1990/91 - NOW

48

0

50

100

150

200

250

SO

UTH

AM

ER

IC

A

•3. West Africa

WES

T A

FR

IC

A

Patrones de Producción: Ghana y Costa de MarfilProduction Trends – Ghana & Côte d'Ivoire

-600

-400

-200

0

200

400

600

800

1000

1200

35%

40%

45%

50%

55%

60%

65%

(Gh

an

a &

Cô

te d

'Iv

oir

e) –

Res

t o

f W

orl

d C

rop

% o

f W

orld

Cro

p

Combined production from Ghana

& Ivory overtook the rest of the

world in 1995/96. This trend has

increased ever since.

60% of total crop threshold

Source: Armajaro

WES

T A

FR

IC

A

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

Côte d'Ivoire

Ghana

Patrones de Producción: Costa de Marfil vs. Ghana Production trends: Côte d’Ivoire vs. Ghana

51

Market feared CI was in a top out phase in the mid 2000’s.

Ghana production declined 26% in 2014/15.

Ghana to partially recover in 15/16 but downward trend might be in place.

WES

T A

FR

IC

A

Patrones de Producción: Costa de Marfil vs. GhanaProduction trends: Côte d’Ivoire vs. Ghana

52

-12%

9%

-11%

-4%

40%

-12%

1%

10%

6%

-14%

21%

-1% -2%

34%

-13%

1%

20%

-30%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Côte d'Ivoire

Ghana

First time we see a proper disconnection between Côte d’Ivoire and Ghana growth.

WES

T A

FR

IC

A

Competencia x Tierra entre ProductosAgrícolas:1980-2013Land Competition between Crops 1980-2013

0.0

0.5

1.0

1.5

2.0

2.5

1980 1985 1990 1995 2000 2005 2010

Mil

lio

n A

cres

Ghana

Cocoa beans Maize Oil palm fruit Rice, paddy

Source: FAO Stat

0

0.5

1

1.5

2

2.5

3

1980 1985 1990 1995 2000 2005 2010M

illi

on

Acr

es

Côte d'Ivoire

Cocoa beans Coffee, green Maize

Oil palm fruit Rice Natural rubber

• No indication of significant land loss to other crops

• Farmers traditionally grow different crops to diversify income sources

• Familiarity of cocoa and fixed prices provide incentives compared to competing crops

• Whilst yields are stable/marginally increased over the years, production rises have been due to new plantings.

WES

T A

FR

IC

A

LA SITUACIÓN en GHANA empezando 2010-11GHANA SITUATION SINCE 10/11

• Farmer price stalled as government spending caused budget deficit

• CMC cut back on fertilizer and mass spraying programs

• Oil economy

• Rural migration esp of young

• Alternative land use (see previous) opportunities esp in gold mining

WES

T A

FR

IC

A

Migración Urbana-Rural en GhanaGhana Rural: Urban Migration

10%

20%

30%

40%

50%

60%

70%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Employment in Agriculture (% of Total Employment)

Source: IMF

Rapid change since 2006

WES

T A

FR

IC

A

EL PROBLEMA EN GHANA - COSECHA 2014/15GHANA PROBLEM - CROP 2014/15

• Unexpected collapse in crop for 14/15

• Not seen in our pod counts

• Fertilizer distribution was delayed but impact should be expressed in pod load/survival

• No weather issues-good rains, harmattan only hit in late Dec/early Jan

• No abnormal disease issues

• Decline from 950 kmt to 705 kmt

• An unprecedented drop of 26%

• One-off or structural change?

• How so sudden?

WES

T A

FR

IC

A

Nigeria: Producción de Cacao y PetróleoNigeria Cocoa & Oil Production

0

500

1000

1500

2000

2500

3000

50

100

150

200

250

300

350

m. B

arr

els

000'

s to

nn

es

Cocoa Oil

Source: Armajaro/Energy Information Administration

WES

T A

FR

IC

A

Oro – Foto tomada Septiembre 2014Gold – Photo from Trek September 2014

WES

T A

FR

IC

A

24th April 2013 - Eastern Region, close to Armajaro sites in Jejeti and Asafo

Gold – Google Earth Images: BEFORE

Source: Google Earth

WES

T A

FR

IC

A

27th December 2014 – Eastern Region, close to Armajaro sites in Jejeti and Asafo

Gold – Google Earth Images: AFTER

Source: Google Earth

WES

T A

FR

IC

A

-

20 000

40 000

60 000

80 000

100 000

120 000

140 000

Cocoa Farmer* Minimum Salary Operations Manager Project Manager Professor Fuel Handler

GH

C/Y

ear

Average Annual Salary in Ghana (GHC/year)

Migración Urbana – Porqué el cambio?Urban Migration – Why the move?

*Assumptions: 5 hectares with yield of 400kg/ha.

Note: Purely income from cocoa. Most farmers will gain income from other crops

WES

T A

FR

IC

A

218 kg

309 kg

kg

50 kg

100 kg

150 kg

200 kg

250 kg

300 kg

350 kg

Within 5km of galamsey operations Outside 5km radius

Main crop yields and gold mining

Estudio sobre la Capacidad en GhanaGhana capacity study

62

WES

T A

FR

IC

A

A BLIP OR A START OF A DOWNWARD TREND ?

• Observed transfer of land to mining

• Not reversible

• Rivers polluted

• Soil contaminated

• Demographics of farmers suggest full rebound unlikely and trend might continue

• Loss of growth potential from the most reliable supplier and forward seller

63

WES

T A

FR

IC

A

LA SITUACIÓN en COSTA MARFIL empezando10/11CDI SITUATION SINCE 10/11

• Main driver of strong output is expansion of acreage in CDI

• Burkinabe origin farmers dominate cocoa farming

• They feel more secure since election and more willing to expand farms

• Increased plantings esp in NW and N – normally new land but sometimes replanting as a result of declining productivity of old farms

• Economics more attractive

• Introduction of fixed price for season enables farmers to plan ahead

• Sustained upward trend in price for 4 seasons

• Enforcement of fixed price has boosted farmer income esp for mid crop

• Increased use of fertilization on farms

• CCC have improved roads/access to markets

WES

T A

FR

IC

A

0%

5%

10%

15%

20%

25%

30%

1 to 5 6 to 10 11 to 20 21 to 30 31 to 40 40+

2013

2014

2015

Acreage share by age of plots

Estudio sobre la Capacidad en Costa de MarfilCôte d’Ivoire capacity study

66

WES

T A

FR

IC

A

Costa de Marfil – Empleo en AgriculturaCôte d'Ivoire – Employment in Agriculture

10%

20%

30%

40%

50%

60%

70%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Po

pu

lati

on

(M

illi

on

s)

Source: IMF

% of Total Employment

WES

T A

FR

IC

A

68

0

200

400

600

800

1000

1200

2011-12 2012-13 2013-14 2014-15 2015-16

IVORY COAST FARMER PRICES CFA

WES

T A

FR

IC

A

14%17% 18%

24%

59%

71%

78%

92%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015

fertilizers pesticides

Pesticides and fertilizers usage


69

WES

T A

FR

IC

A

CUESTIONES QUE ENFRENTA COSTA de MARFILISSUES/CONSEQUENCES FACING CDI

• Aging farmers

• Farms getting bigger causing increased demand for paid labor –much of it coming from families in north attracted by potential of having own farm - potential child labor issues

• Movement to cities by younger people – requiring more non-family labor – potential child labor issues

• Spread of Cocoa Swollen Shoot Virus

• Lack of high quality, high yielding planting material to rejuvenate farms

• Deforestation accelerated – rainforest largely destroyed

70

WES

T A

FR

IC

A

52%57%

64% 65%

0%

20%

40%

60%

80%

2012 2013 2014 2015

Swollen Shoot Infected Farms


71

WES

T A

FR

IC

A

•Conclusion

• Demand continues to grow at 2-2.5% pa as global economy recovers from recession

• South America (particularly Peru & Ecuador), to continue expanding cocoa production

• Indonesia. Sulawesi might stabilize but Sumatra production will drop. Small farms, the price of land and competition from other activities are the impediments to growth

• No meaningful expansion elsewhere in Asia – land pressure, disease risk, urbanization

• Ivory Coast uptrend intact and strong because of new plantings but likely to fade as available land supply diminished.

• Ghana a huge question mark. The upward trend looks over. Can it stabilize around 800 kmt level in face of multiple problems?

75

SUPPLY AND DEMAND IN COCOA ARE SELF CORRECTING

• This is because there is no direct substitute for cocoa

• A tree crop which takes 3 years from planting to production

• Signals to increase production are conveyed by higher prices

• Similar to coffee, citrus, livestock, dairy and minerals

• Much slower than row crops and rice which have a lead time of just 6 months and are also grown in 2 hemispheres

76

• If we experience a supply problem prices will rise to ration demand

• However if prices rise too steeply or rapidly there is demand destruction until the supply becomes adequate again

• These tensions maintain the market in approx. balance

• There will be no 1 million ton deficit in 2020

77

La Oferta y la Demanda: Potencial para 2020S&D Potential Picture in 2020

2500

3000

3500

4000

4500

5000

000s

to

nn

es

Production Grindings

Source: Armajaro Data

Equilibrio entre la Oferta y la DemandaS&D balance

79

-500

-400

-300

-200

-100

0

100

200

300

400

500

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000 Surplus/deficit Net production Grindings

SíNTESIS de la DEMANDA SUMMARY OF DEMAND

• Grind + 3.0% in 2013/14 as general economic recovery from 2008/09 financial crisis

• Over-capacity in cocoa processing so grind > final consumption leading to increased product stocks at end 2014

• 2015 factories have chosen to slow production and work off stocks as competition for sales has led to negative processing margins in most places

• Grind in 2014/15 est. - 3.2%

• Chocolate consumption in developed economies stable and near long-term average but weak demand in BRIC economies – CHINA, BRAZIL, RUSSIA

• Disappointing sales from over optimistic chocolate manufacturers eg Hershey, Mondelez

• Expect resumption of grind upward trend next year +3.5% as product stocks now low

Dem

an

d

World grind: large rebound potential in 2015/16

81

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Actual grind growth

Model grind growth

Dem

an

d

FACTORES DE RIESGO a CORTO PLAZOSHORT TERM RISK FACTORS

• Weather has been benign for several years but some immediate risk ahead

• Drier than normal weather in W. Africa during summer will cut Ivory Coast crop sharply in 15/16

• Unanswered questions about Ghana’s future

• Indonesia already impacted by El Nino-very dry

• Ecuador –monilia present and could be widespread if rains in Q4 show similar pattern to previous EN’s

82

83

EL CLIMA WEATHER

COMPARISON – CENTRAL AND EAST pACIFIC

85

NOAA CPC MODEL

86

ECMWF MODEL

87

August

88

1982 Anomalies 1997 Anomalies

September

89


October

90


November

91


December

92


• Demand growth rebound in 15/16 after a poor year

• Balance in 2014/15 and deficit next a VERY high probability

93


10/11 11/12 12/13 13/14 14/15 15/16

Gross tree crop 4,331 4,025 3,987 4,364 4,116 4,024

% change 19.20% -7.10% -0.90% 9.50% -5.70% -2.20%

Net tree crop 4,296 3,992 3,951 4,320 4,075 3,983

Grindings 3,947 3,947 4,094 4,219 4,084 4,227

% change 5.70% 0.00% 3.70% 3.10% -3.20% 3.50%

94


95

10/11 11/12 12/13 13/14 14/15 15/16

Surplus / Deficit 349 45 -143 101 -9 -244

Stocks 1,640 1,685 1,542 1,644 1,635 1,391

Stocks to grindings ratio

41.60% 42.70% 37.70% 39.00% 40.00% 32.90%

Thank You

96

Es real el deficit de 1 millon de toneladas en el 2020?

Documents

Transcript of Es real el deficit de 1 millon de toneladas en el 2020?