Cocoa September Futures Discount to December Widens on Inventory
Category: Cocoa
(Businessweek) – The discount for September cocoa futures against the December contract more than doubled in the past three sessions in New York on speculation that inventories will increase soon.
Awaiting quality grading by ICE Futures U.S. were 1,267 bags of cocoa, or 314,215 pounds, with almost 80 percent from Indonesia, data showed today. The futures discount widened to $30 a metric ton from $13 on Aug. 8, when the quantity for grading was 121 bags. Stockpiles in warehouses monitored by the exchange have climbed 27 percent this year. On June 5, they reached 5.17 million bags, the most since May 2012.
On Aug. 8, cocoa reached $2,525 a ton, the highest price for a most-active contract since Dec. 3, partly because of concern that dry weather will hamper crops in West Africa, the world’s top growing region.
“There’s more supply coming into the warehouses, and that’s naturally bearish for the market,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “Cocoa has moved up very quickly, and if we get any rains this weekend, that’s going to probably push prices lower. If we don’t, we will continue to move higher.”
Ivory Coast is the top grower, followed by Ghana and Indonesia.
Cocoa futures for December delivery, the contract with the highest open interest, fell 1.6 percent to close at $2,458 a ton today in New York. The commodity climbed in the previous six sessions, the longest rally in almost a year.
The price for September delivery dropped 1.8 percent to $2,428 a ton. Estimated open interest was 15,681 contracts, compared with 88,718 for the December contract.
Yesterday, inventories dropped 0.3 percent to 4.79 million bags.
