Cocoa Bulls Boost Bets on Rising London Price to 1-Year High (1)

(Businessweek) – Money managers boosted bullish bets on cocoa traded in London to the highest in more than a year as dry weather in West Africa and rising demand signal shortages, according to data from the NYSE Liffe exchange.

Investors held a net-long position, or a bet on higher prices, of 57,966 futures and options in the week ended Sept. 3, the Commitments of Traders report published the bourse’s website today showed. That’s the biggest bullish bet since Aug. 28, 2012 and compares with a net-long position of 54,310 contracts a week earlier, the data showed. The beans for December delivery slid 0.9 percent in the period.

Cocoa prices jumped 23 percent on Sept. 5 from a 14-month closing low on March 4, entering a bull market. Demand will outstrip supply by 209,000 metric tons in the season ending Sept. 30, estimates KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania. The shortage next season will amount to 188,000 tons. Dry weather in leading producer Ivory Coast last month threatened to cut output.

“Even if the weather stays wet over the weeks ahead, it may not do much to help, in which case we could see prices moving somewhat higher over the course of September, aided as well by the bullish-looking technicals,” broker INTL FCStone Inc. said in a monthly report e-mailed Sept. 7. “There are concerns that the dry conditions have already taken a toll.”

In robusta coffee, money managers more than doubled bets on lower prices in the period as the next crop in Vietnam, the world’s largest producer of the variety, may rise to a record. The net-short position was 5,533 futures and options, up from 2,431 contracts a week earlier, exchange data showed. The beans used to make instant coffee and espresso rose 0.7 percent.

Harvest

Vietnam will probably harvest 1.7 million tons (28.3 million bags) of coffee in the 2013-14 season that starts Oct. 1, up 17 percent from a year earlier, according to the median of nine trader and shipper estimates compiled by Bloomberg last month. Volcafe, a unit of commodities trader ED&F Man Holdings Ltd., on Aug. 30 forecast a 30 million-bag crop in 2013-14.

“Vietnam is approaching a record crop,” FCStone said. “Coffee remains in chronic surplus and farmers are resorting to aggressive discounting to get rid of unwanted beans, so we are not that upbeat on the complex going forward.”

In white, or refined, sugar, money managers’ reduced their net-long position by 42 percent. Investors were betting on higher prices by 6,682 futures and options as of Sept. 3, down from 11,504 contracts a week earlier, exchange data showed. The sweetener fell 0.1 percent in the period.

In feed wheat, money managers increased their net-short position to 625 contracts from 623 lots a week earlier. The grain advanced 2 percent in the period.