Cocoa, like a number of “exotic” beverages and spices, was originally served as a luxury drink to the Aztec court, and later to Spanish royalty. Gradually, the consumption of cocoa as a beverage spread throughout several major European cities, as it became more popular and less expensive.
The great transformation of cocoa from a beverage to a solid form began in 1828, when liquid cocoa butter (called liquor) could be pressed out of ground cocoa beans and then used as a base with sugar to make chocolate candy. The shift from beverage to solid candy added a whole new manufacturing component to the marketing chain, and made cocoa easily transportable and consumable. The invention of milk chocolate 40 years later further increased the attraction for chocolate and the demand for cocoa beans. Once cocoa became available to general society, its significance in the world marketplace was ensured.
The cocoa tree is strictly a tropical plant, thriving only in hot, rainy climates, with cultivation generally confined to areas not more than 20 °C north or south of the equator. The fruit (bean) of the cocoa tree appears as pods. When ripe, these pods are cut down and opened, and the beans are removed, fermented, and dried. Weather conditions, disease, and insects can have a major impact on annual cocoa yield, and thus, prices are subject to sudden moves, making cocoa futures important to hedgers and speculators alike. A distinction is made between about 20 different sorts of cocoa. Criollo (the most noble and most expensive sort) and Forastero are used for producing chocolate. The share of Criollo produced in South America is only 15 % of the global production. The tougher sort Forastero is planted in Africa and is mainly used for cocoa-mixtures or composites. In September/October begins the main season of harvesting in West Africa and can last until January/March.
The most important trading place for cocoa is the New York Board of Trade (NYBOT). The futures are traded in U.S. Cent per ton (t) and comprise 10 tons per contract. The trade at the London International Financial Futures Exchange (LIFFE) began in the year 2000. The contract-size for both trading places is identical with 10 tons, but at the LIFFE the quotation is stated in British Pounds.
Most important stock exchange centers: NYBOT and LIFFE
Contract-cycles: March, May, July, September and December
Contract-size: NYBOT: 10 t., stated in U.S. Dollars, LIFFE: 10 t., stated in Brit. Pounds.
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