Cocoa markets in New York and London were higher Friday after British Prime Minister Theresa May's Conservative Party unexpectedly lost its majority in Parliament, pushing down the British pound against the dollar.
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Cocoa futures are traded in both New York, in dollars, and in London, in sterling. When the sterling falls against the dollar, cocoa prices in London tend to rise as traders jump in to snatch up the relatively cheaper cocoa.
London cocoa prices were up 4.2% at GBP1,600 a metric ton on the ICE Futures Europe exchange and helped boost cocoa demand ideas in general, with New York futures up 2.4% at $2,010 a ton on the ICE Futures U.S. exchange.
The London cocoa contract is one of the only commodities contracts still traded in sterling, long after most other markets have moved to the dollar. The two cocoa markets are of roughly similar sizes, but they are traded in different currencies to serve slightly different markets.
"When you get a weak pound, you get a stronger cocoa market," said Mike Seery, president of Seery Futures. "But those reactions don't seem to last very long."
Fundamentally, demand for cocoa in Europe, the world's largest consuming region for chocolate, has recently disappointed bullish traders. The tonnage of beans processed in Europe rose 1.1% in the first quarter from a year earlier to 339,485 metric tons, falling below industry expectations, according to data from the European Cocoa Association.
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Despite the increase in cocoa beans processed above last year, quarterly figures remain relatively flat and demand for cocoa has failed to recover to 2015 levels, when tonnage reached 342,442 tons in the fourth quarter.
This month, the International Cocoa Organization raised its forecast for the 2016/2017 season, indicating a surplus of 382,000 tons versus a previous estimate of 264,000 tons, as supplies of beans swell in Ivory Coast, the world's largest grower.
In other markets, raw sugar for July lost 0.1% to 14.33 cents a pound, arabica coffee for July was up 1.2% at $1.28 a pound, frozen concentrated orange juice for July lost 0.7% to $1.3795 a pound, and July cotton lost 0.9% to 75.84 cents a pound.
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(END) Dow Jones Newswires
June 09, 2017 12:06 ET (16:06 GMT)