Cocoa Drops on Speculation Investors May Sell

September 18th, 2013

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Category: Cocoa

(Bloomberg) – Cocoa dropped from a one-year high in New York on speculation of investor sales to profit from this year’s best-performing commodity. Sugar and coffee fell.

Cocoa gained 18 percent in London and 17 percent in New York this year. The beans become the best performer in the Standard & Poor’s GSCI gauge of 24 raw materials yesterday, beating crude. Money managers held record bets on rising cocoa prices in both London and New York in the week ended Sept. 10, data from the U.S. Commodity Futures Trading Commission and the NYSE Liffe exchange compiled by Bloomberg show.

“One potentially bearish risk we see in the short term is the very large net speculative length on the cocoa futures markets,” Kona Haque, a London-based agricultural commodities analyst at Macquarie Group Ltd., said in a report e-mailed today. “At over 35 percent of total open interest, clearly funds have been a key driver in pushing prices higher.”

Cocoa for December delivery dropped 0.6 percent to $2,621 a metric ton by 7:04 a.m. on ICE Futures U.S. in New York, after touching $2,648 a ton, the highest since Sept. 17 last year. Cocoa for delivery in the same month fell 0.6 percent to 1,712 pounds ($2,724) a ton on NYSE Liffe in London.

Net Long

Speculators held a net-long position, or a bet on higher prices, of 65,264 contracts on ICE, the biggest on record, data from the Washington-based commission showed. In London, money managers were net-long by 61,644 futures and options, the most since the exchange started publishing the data in 2011.

Cocoa accelerated gains the past two months, and there are “increasingly dismal prospects for the next crop due to the prolonged absence of sufficient rainfall in West Africa,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report e-mailed today.

Raw sugar for delivery in March fell 0.4 percent to 17.46 cents a pound in New York. White sugar for December delivery slid 0.4 percent to $483.80 a ton in London.

Arabica coffee for December delivery declined 0.1 percent to $1.1915 a pound on ICE. Robusta coffee for delivery in November dropped 0.4 percent to $1,724 a ton on NYSE Liffe.

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