Cocoa futures dropped Thursday as concerns over a cocoa glut continued to weigh on traders.
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Cocoa for September fell 1% to settle at $1,927 a ton on the ICE Futures U.S. exchange.
Ivory Coast, the world's top cocoa grower, is expected to maintain the guaranteed farmer price at 700 CFA francs a kilogram for the main crop harvest, which starts in October, according to a Reuters report citing unnamed sources. Despite the sharp slump in world cocoa prices, the unchanged price paid by the Ivory Coast government would continue to stimulate cocoa output from the country.
At the same time, while heavy rain continued to batter the cocoa mid-crop in the country, Ivory Coast is expected to benefit from the wet weather and kick off a strong and early start for the October-to-March main crop if there is adequate sun, according to Reuters.
"The market still feels (like) we're going to have a big surplus," said Nick Gentile, managing partner at Nickjen Capital.
Last week, noncommercial funds added to their net short position to a total of 50,534 lots, up from 36,702 lots, according to the Commitment of Traders Report.
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"They're short for a reason," he said, adding that some traders might cover their short positions this week.
Cocoa has struggled to move higher amid an expected surplus of beans, along with sluggish growth in demand.
Last month, the International Cocoa Organization raised its forecast for the 2016-17 season, indicating a surplus of 382,000 tons, compared with a previous estimate of 264,000 tons, as supplies of beans swell in Ivory Coast, the world's largest grower. Several private-research firms have already predicted another large surplus for the next season, traders said.
In the latest report, the ICCO increased its forecast for global production in 2016/2017 by 140,000 tons to a record 4.69 million, up 18.1% from the previous season. The increases were expected to largely come from Ghana and Ivory Coast.
In other markets, raw sugar for July was up 1.5% to close at 13.92 cents a pound, arabica coffee for September fell 0.7% to $1.2910 a pound, frozen concentrated orange juice for September was down 1.8% to close at $1.3680 a pound, and December cotton added 1% to end at 68.35 cents a pound.
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(END) Dow Jones Newswires
July 06, 2017 14:50 ET (18:50 GMT)