Cocoa Extends Losses; Arabica Coffee Rebounds

(Wall Street Journal) – Cocoa prices slipped to a more than five-month low on Tuesday on an expected increase in supply of the key chocolate ingredient from top-growing region West Africa.

December cocoa on the ICE Futures U.S. exchange fell 1.6% to $2,923 a ton, the lowest settlement for the most-actively traded contract since May 16.

The larger of West Africa’s two annual cocoa harvests is ramping up. The region supplies more than two-thirds of the world’s cocoa beans.

At the same time, the market has been shaken by reports of weak demand. The Cocoa Association of Asia reported a 5.9% drop in third-quarter grindings in Asia to 151,643 metric tons last week, even though the data included production from two new factories. Grindings are viewed as a barometer for chocolate demand.

Third-quarter cocoa grindings in Europe, the world’s biggest per capita chocolate consumer, fell 1.1% on the year to 327,866 metric tons, figures from the Brussels-based European Cocoa Association showed earlier this month. However, North America’s quarterly figure hit a record and beat market expectations.

In other markets, arabica-coffee futures rebounded from a one-month low on expectations that a continued lack of rain would hurt Brazil’s production next season.

Forecaster DTN said Brazil’s main coffee-growing region would see mostly hot and dry weather this week.

“Limited rain and episodes of above-normal temperatures continue to stress coffee trees in need of more rain for flowering,” it said.

The December coffee contract ended 0.8% higher at $1.9235 a pound.

Raw sugar for March gained 0.6% to settle at 16.13 cents a pound. Cotton for December settled 1.3% higher at 64.47 cents a pound while orange-juice concentrate for November ended down 0.2% at $1.3705 a pound.