Barry Callebaut CEO Discusses El Nino's Impact on Cocoa Prices and Fuel Costs
Analysis of Market Factors Affecting Cocoa and Fuel Prices
By Paolo Laudani
El Nino's Influence on Cocoa Markets
June 2 (Reuters) - The chief of Barry Callebaut, one of the world's top cocoa processors, said on Tuesday that El Nino weather conditions could drive up cocoa bean prices by a few thousand pounds per metric ton.
El Nino, a climate pattern that can raise temperatures and increase the risk of extreme weather, may reduce the yield of crops including cocoa, limiting supply and pushing up prices.
Expected Price Movements
However, the prices should not jump as dramatically as they have done in the past couple of years, CEO Hein Schumacher said on a press call.
London cocoa futures are trading at £2,944 ($3,964) per ton, down from more than £9,000 in April 2024.
Regional Weather Observations
"Usually by the end of June and July, you sort of know what (El Nino) is going to lead to," Schumacher said, pointing to much higher than normal rainfall in Ecuador and much higher temperatures in West Africa among the phenomena Barry was "very cautiously" observing.
Forecasts and Historical Context
The World Meteorological Organization has said there is an 80% chance that an El Nino event will develop between June and August, and a 90% chance it will last until at least November.
El Nino naturally occurs every two to seven years, when weakening trade winds cause warming of surface waters in the eastern Pacific. This can lead to higher global temperatures and disrupted rainfall, meaning drought in some regions and heavy rains in others.
Impact of Middle East Conflict on Fuel Costs
CEO Insights on Fuel Price Risks
IRAN WAR-RELATED FUEL COSTS
Schumacher, who became the CEO in January, said he expected the main impact from the Middle East war to be on fuel, which is Barry's main concern in terms of next year's overall costs.
Operational and Demand Implications
"(Fuel) has a direct impact on our operations and an indirect impact on demand and so forth, and that's something that we need to look at to what extent we can offset that and want to offset that," he said.
Additional Information
($1 = 0.7427 pounds)
(Reporting by Paolo Laudani in Gdansk, editing by Milla Nissi-Prussak)
