Published On: Mon, Sep 9th, 2013

Cocoa futures enter bull market as supply crunch looms

Cocoa futures rose to the highest in almost a year in London, entering a bull market, on signs falling production in top growers Ivory Coast and Ghana isn’t keeping up with demand.

Global cocoa demand will outstrip supply by 209,000 metric tons in the season ending Sept. 30, estimates KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania. That is bigger than the 52,000-ton deficit forecast by the International Cocoa Organization in London. The shortage next season will amount to 188,000 tons, KnowledgeCharts data show.

Cocoa prices jumped 23 percent from a 14-month closing low on March 4, signaling higher costs for candy makers including Hershey Co. and Nestle SA. (NESN) Farmers in Ivory Coast and Ghana are harvesting the mid-crop, or smaller of two annual harvests. At the same time, demand for chocolate has advanced, sending the cost of cocoa butter relative to bean prices last month to the highest since 2008 in Europe.

“Two months ago, the consensus deficit for the current season was very different than what it appears to be now,” Jonathan Parkman, co-head of agriculture at Marex Spectron Group, said by phone from London today. “A lot of that has to do with the Ivory Coast and Ghana numbers showing that the mid-crops weren’t so good, showing that production numbers were slightly lower than we had previously thought.”

Cocoa futures for December delivery climbed 3 percent to settle at 1,704 pounds ($2,658) a ton on NYSE Liffe in London. Earlier today, prices rose to 1,706 pounds a ton, the highest for a most-active contract since September 14, 2012. Prices will rise to 1,750 a ton before the end of the year, the highest since September 2011, according to the median of nine trader estimates published by Bloomberg on August 15.

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