Cocoa Falls on Speculation Prices Climbed Too Far; Sugar Gains

Cocoa fell to the lowest level this month in New York and London on speculation prices that rallied in the past two months climbed too far as supplies will probably be enough to meet demand. Sugar advanced and coffee slid.

Futures gained 11 percent in New York and 9.4 percent in London in March and April as speculators boosted bets on higher prices. Global cocoa production will outpace consumption by 11,000 metric tons in the 2012-13 season ending Sept. 30, Macquarie Group Ltd. estimated on May 3. That reverses a previous forecast for a shortage as abundant rainfall and good sunshine improved the outlook for the the smaller of two annual harvests, known as the mid-crop, in top producer Ivory Coast, the bank said.

“An overdue correction looks to be beginning,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a report e-mailed yesterday. “The market does look poised to at least test support at the $2,300 a ton area.”

Cocoa for July delivery slipped 0.9 percent to $2,328 a ton by 5:31 a.m. on ICE Futures U.S. in New York. The beans used to make chocolate fell to as much as $2,321 a ton, the lowest for a most-active contract since April 30. Cocoa for July delivery fell 0.3 percent to 1,537 pounds ($2,365) a ton on NYSE Liffe in London.

Speculators boosted bets on rising cocoa prices in New York to 31,810 contracts in New York in the week ended April 30, the biggest net-long position since 2008, U.S. Commodity Futures Trading Commission data compiled by Bloomberg showed. In London, money managers increased best on higher prices to a 5-month high in the same period, according to NYSE Liffe data.

London Backwardation

In London, cocoa for delivery in May was 18 pounds a ton more expensive than the futures for July, reversing a discount of 4 pounds a ton a week earlier. That market structure, in which earlier dated contracts price above later ones is known as backwardation and may signal limited supplies for now. The May futures switched to being more expensive yesterday.

Arabica coffee futures for July delivery were 0.1 percent lower at $1.4775 a pound on ICE. Robusta coffee futures for July delivery were little changed at $2,044 a ton on NYSE Liffe.

Coffee production in Vietnam, the largest grower of robusta beans, may climb 4.9 percent to 1.5 million tons in the 12 months starting October from 1.43 million tons a year earlier, according to the median of 10 trader and shipper estimates compiled by Bloomberg. That would be the highest since a record 1.65 million tons in 2011-2012. Output will gain as rain this month ended drought in the main producing region.

Raw sugar for delivery in July rose 0.4 percent to 17.54 cents a pound in New York. White, or refined, sugar for delivery in August gained 0.3 percent to $487.70 a ton in London.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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