Cocoa Rallies on Concerns Over West African Output
Category: Cocoa
(Wall Street Journal) – Cocoa futures rallied Thursday as traders worried about supplies coming out of West Africa, the source of most of the world’s supplies of the key chocolate ingredient.
Prices broke above $3,000 a ton for the first time since October and then pulled back. Cocoa for delivery in March, the most actively traded contract, ended at $2,986 a ton, up 2.5% on the day at the highest settlement since Dec. 22 on the ICE Futures U.S. exchange.
“Arrivals in Ivory Coast are weaker, and traders think that the crops in West Africa have been overestimated,” said Jack Scoville, vice president at Price Futures Group in Chicago.
In addition, some traders are positioning themselves ahead of reports from Europe and North America on the amount of cocoa beans processed in the fourth quarter of 2014. Reports for both regions are expected next week.
“Weaker European demand will be anticipated, but North American and Asian demand should hold strong,” Mr. Scoville said.
Futures were also given a boost Thursday as the market triggered buy-stops, or pre-placed orders to buy when futures hit a certain level, at $2,975 and $3,000 a ton.
“It looks to me that prices are going to retest the $3,200 level,” said Mike Seery, president of Brokerage Seery Futures in Plainfield, Ill.
In other markets, raw sugar for delivery in March ended up 0.7% at 14.88 cents a pound, the highest level since Dec. 19. Futures for the sweetener were boosted by worries about dwindling rains in top grower and exporter Brazil.
“The possibility of dryness is agitating the market,” said James Cassidy, head of the sugar desk at brokerage Newedge in New York. “A continuation of dry conditions in Brazil through January would genuinely add to concern and price stability.”
Last year, dry weather in January presaged the worst drought in decades for Brazil.
Worries about rains in Brazil—also the source of a third of the world’s coffee—boosted arabica futures as well. Arabica coffee for March delivery settled up 1.1% at $1.7690 a pound, the highest level since Dec. 16. It was the fourth consecutive session of gains for the most actively traded coffee contract.
