Cocoa Rises Again on Revived Demand

By Carolyn Cui Features Dow Jones Newswires

Cocoa continued its upward march Friday, buoyed by signs that cocoa demand has revived after a long slide in prices.

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Cocoa for September gained 2.3% to settle at $1,915 a ton on the ICE Futures U.S. exchange.

Barry Callebaut Group, one of the world's largest chocolate producers, reported a 2.8% increase to 1.4 million tons in sales volume during the nine months through May 31, exceeding the 2% cocoa grind increase reported by the European Cocoa Association for the second quarter.

The growth was mainly driven by stronger performance in its Gourmet and Specialties division, according to the Swiss company.

"This is where the demand is. So I don't think the grind number reflects the total usage," said Judy Ganes Chase, founder of J. Ganes Consulting, LLC, a research company specialized in soft commodities.

There are many upstarts that make chocolate from beans to specialty bars, which aren't included in the grind report, she said. In addition, lots of grinding now is done in the cocoa producing countries, such as Ivory Coast and Ghana.

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Prices for cocoa have tumbled over the past year, as production is expected to outstrip demand for the current crop year and the next. 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.

Demand for cocoa was gradually eroded through a long run of high prices. Cocoa prices surged between 2014 and 2015, first driven by the deadly Ebola virus that slowed farming, and then by a strong El Nino weather system that swept West Africa and hurt crops there. In December 2015, cocoa hit $3,417 a ton, an all-time high.

Many chocolate makers reduced the size of their candy bars, or used cocoa-butter equivalents to replace the butter made from cocoa beans, in part to control costs and also to address consumer worries about obesity. As a result of changing appetites, even as cocoa prices plunged, bean grinding remained sluggish because chocolate makers were reluctant to increase the size of their candy bars, especially in developed markets.

In other markets, raw sugar for October was up 1.1% to settle at 14.30 cents a pound, arabica coffee for September rose 1.9% to close at $1.3370 a pound, frozen concentrated orange juice for September was down 1.6% to end at $1.2690 a pound, and December cotton added 0.3%, ending at 66.58 cents a pound.

(END) Dow Jones Newswires

July 14, 2017 15:59 ET (19:59 GMT)