Cocoa prices continued to fall Monday, after a brief rally late last week, as traders remained bearish on the oversupplied market.
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Cocoa for July dropped 0.7% to $1,838 a ton on the ICE Futures U.S. exchange, as prices once again fell toward their 10-year lows.
Friday, the contract jumped nearly 3%, after demand data out of North America and Asia showed signs of a slight recovery, but the rally once again proved to be short-lived.
Cocoa has been one of the worst-performing commodities this year, as the 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.
Latest data from the Commodity Futures Trading Commission showed that speculators in the cocoa market added to their short positions for the second straight week. Hedge funds and other money managers betting on lower prices for cocoa outweighed bullish traders by 32,771 contracts as of April 18.
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However, 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 down 1.3% to 16.20 cents a pound, arabica coffee for July added 0.2% to $1.3310 a pound, May frozen concentrated orange juice was up 0.3% to $1.6040 a pound, and July cotton moved down 0.1% to 79.25 cents a pound.
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(END) Dow Jones Newswires
April 24, 2017 10:20 ET (14:20 GMT)