Cocoa Futures Surge to Highest Level in 28 Months

January 28th, 2014

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Category: Cocoa

(Wall Street Journal) – Cocoa futures rose to a more than 28-month high Monday on concerns that supplies for the key chocolate ingredient won’t keep up with demand this year.

Cocoa for delivery in March on ICE Futures U.S. rose as high as $2,868 a ton, the highest price for the most actively traded contract since Sept. 14, 2011.

Stockpiles of cocoa beans in warehouses monitored by the ICE fell almost 3% in the week ended Friday. The decline underscores concerns over cocoa supplies, which are expected to fall short of demand by about 70,000 metric tons, according to the International Cocoa Organization.

The decline in stockpiles “gives me the idea that we’re going to keep that pace consistent,” said Hector Galvan, a senior market strategist at Chicago-based brokerage R.J. O’Brien.

One indication of higher chocolate demand is a rise in prices for cocoa butter, which is used to give chocolate its texture. U.S. cocoa-butter prices rose 2.6% in the week ended Jan. 24 to $7,339 a ton.

Supplies are “getting a little bit more snug,” said Sterling Smith, a futures specialist at Citigroup.

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