Olam deal raises concerns in cocoa market

|By:, SA News Editor

Olam's $1.3B deal to buy rival Archer Daniels Midland's cocoa processing business may reduce liquidity in the cocoa bean trade, raising concerns about volatile prices and a potential shake-up of customer relationships.

Olam buys around 500K tonnes of cocoa annually, and it said it will increase its processing capacity to more than 700K tonnes, or 16% of world supply, with this deal.

This could force users supplied by Olam to look elsewhere for many of their beans, putting a strain on prices.

Related stocks: MDLZ, HSY, OTCPK:NSRGY, OTC:BYCBF

ETFs: NIB, CHOC

Previously: ADM to sell global cocoa business to Olam International for $1.3B (Dec. 15 2014)