Investors’ Bullish Cocoa Bets Rise to Record on Shortages

(Businessweek) – Money managers’ bets on higher cocoa prices rose to a record in the latest week as shortages loom for the current season, according to data from NYSE Liffe, the derivatives arm of NYSE Euronext.

Investors were net-long, or betting on price gains, by 67,131 futures and options as of Oct. 29, the Commitments of Traders report on the exchange’s website showed today. That was up from the prior record at 65,466 contracts a week earlier. Cocoa for delivery in March retreated 2.8 percent in the period.

Bean supplies will fall short of demand by 203,000 metric tons in the 2013-14 season begun last month, according to data from KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania. That follows a 221,000-ton deficit in the prior period. Global chocolate confectionery sales will rise 6.2 percent to a record $117 billion next year, estimates Euromonitor International Ltd., a consumer research company.

“The fund position looks a bit dangerous,” Jerome Jourquin, head of agricultural derivatives at Aurel BGC in Paris, said by e-mail today. “The market has been going back down. If it continues, funds’ liquidation will push the market sharply lower.”

Selling by funds would send cocoa for delivery in December traded in London to 1,660 pounds ($2,650) a ton and then 1,650 pounds, according to Jourquin. The latter price marks the 38.2 percent retracement of the uptrend from June 25 to Oct. 15, he said, referring to so-called Fibonacci analysis. The contract recently traded at 1,692 pounds.

Demand Signal

Cocoa entered a bull market in September as processing data indicated stronger demand. The so-called grind rose 4.7 percent in the third quarter in Europe, accounting for 40 percent of usage, and increased 12 percent in Asia and 8.2 percent in North America, figures from industry groups showed.

March cocoa retreated as much as 0.8 percent today in London after the publication of the trader holdings data. Prices had opened 0.2 percent lower.

In robusta coffee, money managers were net-short by 8,005 futures and options, rising from 7,931 contracts a week earlier, the data showed. The beans used to make instant coffee and espresso slid 4.7 percent in the latest week in anticipation of a record-high harvest in Vietnam, the world’s largest producer of the variety.

Investors trimmed bets on rising white-sugar prices by 1.2 percent. They were net-long by 11,910 futures and options, against 12,058 contracts a week earlier, exchange data showed. The sweetener fell 4.4 percent in the most recent week.

In feed wheat, money managers were net-short by 159 contracts, unchanged from a week earlier. The grain was little changed in the period.