Cocoa Futures Decline as Investors Book Profits
Category: Cocoa
(Wall Street Journal) – Cocoa futures posted their biggest one-day loss in nearly two years on Wednesday as investors booked profits in the market after prices hit a 3 1/2 year high last week.
Prices for the key chocolate ingredient surged recently on concerns that the deadly Ebola outbreak in West Africa could reach Ivory Coast or Ghana, which together produce about 60% of the world’s cocoa. No cases of the virus have been reported in either country, but Ivory Coast shares a border with Liberia and Guinea, two of the countries hardest hit by the virus.
“This is profit-taking (thanks to) the inability of the market to absorb any further risk premium,” said Hector Galvan, senior market strategist at RJO Futures in Chicago. “So far, Ebola has not been reported in Ivory Coast or Ghana.…I am not surprised that the market finally succumbed to the lack of news.”
Cocoa for delivery in December on the ICE Futures U.S. exchange ended at $3,172 a ton, down 3.9%. That was the biggest one-day drop since Oct. 24, 2012, and the lowest close since Sept. 17.
Arabica-coffee prices extended their gains, with the December contract rising 3.7% to $2.0040 a pound, the highest settlement since Sept. 4, as traders and investors continued to worry about next season’s crop.
Futures are up 81% this year, after the worst drought in decades in Brazil—the source of about half of the world’s arabica beans—clipped output and raised worries over the size and quality of next season’s crop. But when unseasonable rains fell in July, some trees started to flower prematurely. The rains were followed by more dry weather, which could force coffee trees to abort the flowers and not produce cherries, the fruit that surrounds the seeds that are roasted to make beans.
“With no significant rainfall in September, an alarming situation with substantial losses for 2015 is projected,” Brazil’s National Coffee Council said in a note Wednesday.
In other markets, raw-sugar futures fell on the sole delivery day for the October contract. Raw sugar for March ended down 2.5% at 16.04 cents a pound. December-delivery cotton rose 1.3% to 62.16 cents a pound after settling at a near-five year low during the previous session. Orange juice for November delivery closed 0.1% higher at $1.4490 a pound.
