Cocoa Futures Climb Most in 16 Months as Global Inventory Ebbs
Category: Cocoa
(Businessweek) – Cocoa futures surged the most in more than 16 months on signs of dwindling world reserves as demand rises.
Global stockpiles of the main ingredient to make chocolate slid 17 percent in the 12 months that ended Sept. 30, according to a document from the London-based International Cocoa Organization obtained by Bloomberg. In the season started Oct. 1, world production will trail demand by 105,000 metric tons, according to Kona Haque, a commodities analyst at Macquarie Group Ltd. in London. The deficit next season will be 74,000 tons, she forecasts.
Prices have increased 26 percent in the past 12 months, trailing only natural gas within the 24 raw materials tracked by the Standard & Poor’s GSCI Spot Index. Tighter supplies will mean higher costs for food makers including Nestle SA, Barry Callebaut AG and Lindt & Spruengli AG.
“The market is reacting to the stockpiles data because it reinforces ideas about back-to-back shortages,” Judy Ganes Chase, president of J. Ganes Consulting in Panama City, Panama, said today in a telephone interview. “That’s a huge number,” she said referring to the inventory drop.
Cocoa for March delivery climbed 3.5 percent to close at $2,791 a ton on ICE Futures U.S. in New York, the largest gain since September 2012.
“The thoughts of deficits going into 2014 are still in the back of investors’ minds,” Hector Galvan, a senior commodity broker at RJO Futures in Chicago, said in an e-mail. “Many of the people who were originally long and then pushed out of the market the last two weeks are likely buying back.”
Processing in Asia, an indication of demand, swelled 10 percent in the fourth quarter from a year earlier, the Singapore-based Cocoa Association of Asia said Jan. 20. Rising chocolate consumption in the region is helping to fuel higher prices, Sterling Smith, a futures specialist at Citigroup in Chicago, said in a telephone interview.
“There is a vast untapped market for cocoa,” Smith said. “2014 looks like it’s going to be a good year for chocolate.”
