IntercontinentalExchange ups requirements for cocoa to boost soft commodities quality to match commercial trading quality; ICE to stop accepting shipments with excessive debris such as shells, dirt

Andrew Rogers

LOS ANGELES , August 26, 2011 (Industry Intelligence) – New York-based commodity exchange IntercontientalExchange Inc. is raising quality requirements for cocoa, no longer accepting shipments with detritis such as shells or dirt to have soft commodities found on derivative markets reflect what is traded commercially, The Wall Street Journal reported Aug. 26.

The change will begin with March 2012 delivery contracts, with additional rules on the minimum bean size to apply beginning with the July 2013 contract.

The new rules will help the contract continue to be the cocoa trade’s global benchmark and ensure that it will satisfy the requirements of the participants in the commercial market who depend on it, an ICE spokesman said.

While only a portion of the derivatives markets for commodities traded globally such as cocoa and coffee are settled with a physical delivery, traders look to exchanges for supplies in times of shortages.

The changes on the exchange will forge a stronger link between what cocoa grinders use and what is on the  market, according to Jos de Loor, Carglll Inc.’s managing director of cocoa and chocolate. Generally, commercial market products are sold with less debris than what is available for futures contracts.

Despite the changes at the ICE, some believe exchange stocks still may not be an accurate reflection of the true value of cocoa use by the U.S. physical markets. Cocoa contacts on the ICE are priced on level with supplies from Indonesia and Malaysia, which often have more debris in them and trade on discount to West African supplies priced on the NYSE Liffe exchange in London.

In December, the ICE stopped coffee that produces ‘aged flavors’ from being included in certified stocks, amid buyer complaints that old beans were part of inventories that are ICE-certified.

The primary source of this article is The Wall Street Journal, New York, New York, on Aug. 26, 2011.

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