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With the coronavirus crisis, cocoa prices plummet, gold and copper suffer

Cocoa unloading in the port of San Pedro, Côte d
Cocoa unloading in the port of San Pedro, Côte d’Ivoire, in March 2015. Thierry Gouegnon / REUTERS

Many commodities saw their prices fall during the week. The Covid-19 pandemic continues to worry markets about its economic consequences, yet markets hate instability. This is bad news for Africa, a continent teeming with this precious wealth that allows tens of millions of families to survive.

Cocoa picks up

Cocoa was squeezed in the markets this week, as investors questioned the imbalance generated by abundant supply in the face of slowing demand.

On the producer side, “The harvest is now almost complete for the main crop in West Africa and the results are very good”said Jack Scoville, analyst at Price Group, in a note. This region of the world is capital for cocoa since Côte d’Ivoire and Ghana together represent more than half of the world cocoa market.

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“Demand is still strong but less than before”, adds Mr. Scoville, a situation capable of weakening the prices of this product which allows millions of small African producers to survive. They have already suffered a lot, especially since the two producing countries are not processing countries.

In London, the tonne of cocoa for delivery in December was worth 1,693 pounds sterling (1,836 euros), after hitting a low in almost seven months, against 1,743 pounds sterling the previous Friday. In New York, the tonne for delivery in May was worth 2,203 dollars (2,057 euros), a level seen more since September, against 2,482 dollars seven days earlier.

The surprise of diving for gold

The recent drop in gold has been “A huge surprise”, according to Joni Teves, analyst for UBS, the yellow metal is generally considered to be a safe haven in times of uncertainty. With the plunge in the equity and oil markets, investors may have been tempted to sell the yellow metal, which had hit a seven-year high ten days ago.

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Other precious metals also looked gray over the week, notably platinum, which fell to a level seen more since 2002 on Monday. Palladium, on the other hand, reached a low on the same day since December. And it had already lost almost 30% last week.

Silver fell to a low on Wednesday since 2009, and copper to a low since January 2016, despite signs of recovery from the Chinese economy. “The roller coaster is not much compared to what is happening in the commodity markets right now”, summed up Mr. Briesemann, insisting on the fate of red metal.

Resumption of activity in China

China, the world’s largest importer of raw materials, unveiled a series of gloomy indicators for January and February on Monday, against the backdrop of the Covid-19 pandemic: industrial production contracted by 13.5% for the first time in almost thirty years, according to the National Bureau of Statistics (BNS).

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There is a glimmer of hope in China for the better in March. Activity has resumed more than 90% outside of Hubei province, the most affected by the virus, assured the powerful planning commission on Tuesday.

Investors’ concerns are now focused on the United States, “Second largest consumer of many metals in the world” according to analyst from Commerzbank, who “Will experience a temporary interruption of the request”.

The World with AFP

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