Cocoa futures bounced higher Monday after a report showed that bearish traders have re-entered the market, returning the contract to a near-record net short position.
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The news lured buyers who saw it as a sign that the beaten-down contract was due for a bounce.
Cocoa for September rose 0.9% to settle at $1,958 a ton on the ICE Futures U.S. exchange. Cocoa futures have been particularly volatile over the last two months, trading back and forth between $2,084 and $1,824 a ton following a steep drop at the start of the year, backed by swelling supplies and lackluster demand.
The International Cocoa Organization has forecast a surplus of 382,000 tons for the 2016-2017 season with robust production in West Africa, which supplies nearly three-quarters of the world's cocoa.
As of last Tuesday, money managers and hedge funds betting on cocoa prices falling outweighed bullish bets by 47,519 contracts, a 49% increase in the contract's net-bearish position over the week prior, according to the U.S. Commodity Futures Trading Commission.
Ivory Coast and Ghana, the world's largest and second-largest producers, are midway through the smaller of two harvesting seasons called the midcrop and traders disagree about how rains are affecting those crops. Showers should be elevated over the next week in Ghana and Ivory Coast, according to WeatherBELL Analytics in New York.
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"There's stories about too much rain damaging the pods and others saying it is beneficial," said Nicholas Gentile, managing partner at NickJen Capital Management. "Some of these cowboy traders are moving the market around."
Capital Economics said in a note it expects the price of cocoa to rebound from here as demand picks up owing to months of lower prices. The firm said it expects cocoa to reach $2,150 per ton by the end of 2017.
In other markets, raw sugar for October rose 0.8% to end at 13.92 cents a pound, arabica coffee for September was up 1.6% to settle at $1.277 a pound, frozen concentrated orange juice for September rose 0.8% to end at $1.3365 a pound and December cotton lost 1.7% to end at 67.45 cents a pound.
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(END) Dow Jones Newswires
July 03, 2017 15:06 ET (19:06 GMT)