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ICE to launch euro-denominated cocoa contract

* Processors in Europe would benefit from new contract

* Euro contract could erode liquidity of sterling contract (Adds comment from CME spokesperson)

By David Brough

LONDON, Jan 6 (Reuters) - ICE Futures Europe said on Tuesday it planned to launch a euro-denominated cocoa contract in April that will run in parallel with the existing sterling-based one, to rival plans by exchange CME to introduce a similar contract.

The move is expected to cut currency risks for cocoa processors including Cargill and Barry Callebaut (Xetra: 914661 - news) operating in euro zone countries. Chocolate makers buying cocoa products such as powder and butter mainly purchase in euros.

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The currency of the world's top cocoa grower Ivory Coast, the CFA franc, is also pegged to the euro.

"If you are a processor or a chocolate manufacturer in Europe, and your currency is in euros, the new contract would mean one less transaction if you trade euros on the London market," said Jonathan Parkman, joint head of agriculture at broker Marex Spectron.

A spokesperson for CME said CME was moving forward with plans to launch its own cocoa contract on its European exchange, CME Europe.

"We're planning to press ahead, but there are no further details on timing," said Fleur Binyon, spokeswoman for CME Group.

Trade sources said a new euro-denominated cocoa contract could potentially erode liquidity of the current sterling-based ICE cocoa contract, but would be unlikely to affect liquidity in the New York ICE cocoa contract.

The London cocoa futures contract was launched in 1928 and is one of the last commodities futures traded in sterling.

Trade sources said speculators were unlikely to have much incentive to start dealing in a new euro-denominated cocoa contract, and so the onus would be on cocoa processors like Cargill and Barry Callebaut to help promote a new euro-denominated contract and build up support among non-commercial dealers, or speculators, in the market.

"Ample liquidity in sterling means that transaction costs in the currency are not immense," one trade source said. "No one outside the European industry is pushing for a euro contract."

The transition away from sterling has already happened in other markets, including ICE's robusta coffee contract, which changed to dollars in the 1990s. (Reporting by David Brough; Editing by William Hardy)