Cocoa Rises to Three-Year High as Industry Seen Buying

(Bloomberg) – Cocoa rose to the highest in almost three years in London on speculation chocolate manufacturers need to stock up with West Africa supplies limited until new harvests start in October.

Inventories are probably only enough to meet demand for six months and the industry usually needs seven to eight months of cover, according to Eric Sivry, head of agriculture options brokerage at Marex Spectron Group in London. Inventories in warehouses monitored by ICE Futures U.S. dropped 4 percent this month, the third consecutive decline.

“The industry is not enough covered,” Sivry said. “This is prompting some market participants to leapfrog the industry and push prices higher.”

Cocoa futures for December delivery jumped as much as 1.1 percent to 1,973 pounds ($3,341) a metric ton on Liffe, the highest for a most-active contract since Aug. 24, 2011. The beans traded on ICE Futures U.S. climbed 0.9 percent to $3,207 a ton by 7:43 a.m. in New York.

Ivory Coast and Ghana, the largest producers, are ending the 2013-14 harvests and usually don’t start the new harvest until October. Ivory Coast sold 1.15 million tons of beans from the new harvest, two people with direct knowledge of the matter said in May. Its production is estimated at 1.7 million tons in 2013-14 by the International Cocoa Organization in London.

Ghana also sells its crop before harvest and produced 900,000 tons in 2013-14, according to ICCO.

Hitting Targets

Both Ivory Coast and Ghana presell 80 percent of their crops, “and both have indicated they have hit their pre-sale target for 2014-15,” Edward George, head of research at Togo-based Ecobank Group, said by e-mail today.

Cocoa climbed 14 percent this year. Output will lag behind demand for a third consecutive season in 2014-15, the longest stretch in 47 years, according to Olam International Ltd. and ICCO data.

Raw sugar for delivery in October dropped 0.4 percent to 16.55 cents a pound on ICE Futures U.S. in New York, and earlier today fell to 16.52 cents, the lowest since Feb. 19. White, or refined, sugar dropped as much as 0.4 percent to $438.50 a ton on Liffe, the lowest since Feb. 12.

Robusta coffee for September delivery declined 0.1 percent to $2,032 a ton in London and arabica coffee was unchanged at $1.807 a pound in New York.