Cocoa prices extended losses Monday.
The cocoa market is fundamentally flush with more beans than chocolate bars to use them and as of Tuesday, hedge funds and other money managers betting on lower prices outweighed bullish traders by 39,140 contracts, a 19% increase in its net bearish position week-over-week. Cocoa for July lost 1.6% to end at $1,812 a ton on the ICE Futures U.S. exchange.
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The cocoa market is entering the smaller mid-crop season in West Africa, the world's largest growing region, and favorable growing conditions are preventing any bullish moves in cocoa from taking off. About 15-20% of the full year's cocoa harvest comes from the mid-crop.
The supply of cocoa is expected to outstrip demand this year. The International Cocoa Organization estimated that production of cocoa will surpass demand in the 2016/2017 season that began in October by 264,000 tons, helped along by record production in Ivory Coast, the largest grower of cocoa in the world. The West African nation is set to produce 1.9 million tons, a 20% increase over last year.
With demand up 2.9% and production up 15% globally, the organization (which represents cocoa producing and consuming countries) said the world is expected to have its first significant surplus in six years. "The only thing that could make cocoa rally is some kind of weather. We need weather to get the market going," said Nicholas Gentile, managing partner at NickJen Capital Management. Mr. Gentile said he expects cocoa to trade in a sideways range of about $300 unless some major weather event threatens cocoa production. A second significant year of surplus, he said, could see the market trading down to $1,500 a ton.
WeatherBell Analytics in New York said steadier rainfall has resumed in West Africa and that above normal showers are expected in Ivory Coast and Ghana over the next 10 days.
In other markets, raw sugar for July rose 0.3% to end at 16.18 cents a pound, arabica coffee futures were up 1.8% to settle at $1.3585 a pound, frozen concentrated orange juice for July was down 1.6% to settle at $1.558 a pound and July cotton rose 0.1% to end at 78.95 cents a pound.
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(END) Dow Jones Newswires
May 01, 2017 15:26 ET (19:26 GMT)