Cocoa Bounces Off 10-Year Lows
April 21 2017 - 4:55PM
Dow Jones News
By Julie Wernau
Cocoa prices bounced off 10-year lows Friday, the day after
demand data out of North America and Asia showed signs of a slight
recovery.
Cocoa for July rose 2.8% to end at $1,850 a ton on the ICE
Futures U.S. exchange, the largest percentage gain for the most
actively traded cocoa contract in a month.
"With the wild drop in cocoa over the past few days everyone is
wondering when will positive support come into the market," said
Michael Kerensky, trader at RJ O'Brien in New York.
Speculators in the cocoa market added to their short positions
for the second straight week following a brief bout of profit
taking earlier this month. Hedge funds and other money managers
betting on lower prices for cocoa outweighed bullish traders by
32,771 contracts as of Tuesday. Recent attempts to rally have been
short-lived in the cocoa market, one of the worst performing
commodities this year.
The cocoa market is moving into a year in which supply of cocoa
is expected to outstrip demand. The International Cocoa
Organization estimated that production of cocoa will surpass demand
in the 2016/2017 season that began in October by 264,000 tons,
helped along by record production in Ivory Coast, the largest
grower of cocoa in the world.
The West African nation is set to produce 1.9 million tons, a
20% increase over last year. With demand up 2.9% and production up
15% globally, the organization (which represents cocoa producing
and consuming countries) said the world is expected to have its
first significant surplus in six years.
Following back-to-back years of weak demand brought on by price
increases from chocolate makers, North America's craving for the
main ingredient in chocolate showed signs of a modest recovery
Thursday as North American factories reported a bump to the number
of cocoa beans processed in the first quarter.
North American cocoa processors reported a 1.2% increase in
beans processed during the first quarter of 2017 from a year
earlier, the highest first-quarter tonnage since 2015.
The 120,152 tons of cocoa beans processed by North American
factories in the first quarter was also an increase over last
quarter when 117,588 tons of beans were processed.
The Cocoa Association of Asia reported grindings Thursday at
177,450 tons, a 19% increase over the same quarter last year but a
drop from the preceding quarter, when processing reached 188,493
tons.
In other markets, raw sugar for July was up 0.6% to end at 16.51
cents a pound; arabica coffee for July lost 1% to settle at $1.329
a pound; May frozen concentrated orange juice was down 0.7% to
settle at $1.60 a pound; and July cotton moved higher to close at
79.33 cents a pound.
Write to Julie Wernau at julie.wernau@wsj.com
(END) Dow Jones Newswires
April 21, 2017 17:40 ET (21:40 GMT)
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