Cocoa prices advanced Thursday after a leading chocolate producer reported strong-than-expected growth for chocolate sales.
Barry Callebaut Group reported a 2.8% increase to 1.4 million tons in sales volume during the nine months through May 31, "driven by strong above-market growth in chocolate of 4.7%," according to the company's latest financial report. Sales volume accelerated to 5.5% in the last three months of the reporting period, the company said.
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Cocoa for September gained 1.9% to $1,856 a ton on the ICE Futures U.S. exchange.
The Swiss company's release provided a much needed encouragement for cocoa bulls, as it was one of the first indicators that the recently low prices for cocoa beans, the main ingredient for chocolate, have boosted demand for the product.
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 5% at 14.17 cents a pound, arabica coffee for September rose 2.8% to $1.3120 a pound, frozen concentrated orange juice for September was down 0.7% at $1.2785 a pound, and December cotton lost 0.9% at 66.65 cents a pound.
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(END) Dow Jones Newswires
July 13, 2017 11:48 ET (15:48 GMT)