Cocoa Gains as Demand Compensates for Ivorian Sales; Sugar Falls

Cocoa climbed for a second day in New York as demand from chocolate makers more than compensated for sales of beans from top producer Ivory Coast. Sugar fell.

Cocoa supplies will trail demand by more than 135,000 metric tons in the 2013-14 season starting next month, a second year of shortages, Aakash Doshi, an analyst at Citigroup Inc. in New York, said in a report dated yesterday. Ivory Coast offered to sell beans for shipment in the 2014-15 season at auctions yesterday and the day before, after futures traded in London entered a bull market earlier this month. That was an “early start” to so-called forward sales, Doshi said.

“We upgraded our forward outlook for cocoa this quarter and expect levels on ICE to trade between $2,500 to $2,800 a ton through the next year on the back of two consecutive seasonal deficits,” Doshi said. Forward sales by Ivory Coast “could pressure the curve, but the overall bias is for prices to remain steady at these stronger trading bands for now.”

Cocoa for December delivery gained 0.9 percent to $2,620 a ton by 6:46 a.m. on ICE Futures U.S. in New York, the highest since Sept. 23. Futures gained 7.6 percent this month and 21 percent this quarter, the most in four years. Futures trading volumes were 48 percent lower than the average for the past 100 days for this time of day, according to data compiled by Bloomberg. Cocoa for delivery in the same month gained 0.3 percent to 1,703 pounds ($2,740) a ton on NYSE Liffe in London.

Cocoa Butter

Ivory Coast offered to sell cocoa for shipment from October to December 2014 at yesterday’s auction at a minimum price of 1,293 CFA francs ($2.65) a kilogram (2.2 pounds), according to data on the website of industry regulator Le Conseil du Cafe-Cacao. That would mean a premium of about 17 pounds ($27) a ton to the March 2015 futures, according to Bloomberg calculations. Beans for shipment in the same period were offered at a premium of about 38 pounds a ton the previous day.

The cost of cocoa butter relative to bean prices, or the so-called butter ratio, rose to 2.73 times the futures in London on Sept. 20, the highest since November 2008, according to data on KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania. Cocoa butter accounts for about 20 percent of the weight of a chocolate bar.

“Cocoa butter ratios have surged to multi-year highs alluding to potentially better demand pull ahead, with North American consumption and pockets of Asia continuing to show strong growth,” Citigroup’s Doshi said.

Arabica coffee for December delivery was little changed at $1.156 a pound on ICE. Robusta coffee for delivery in November was 0.8 percent lower at $1,649 a ton on NSYE Liffe. The price touched $1,632 a ton, the lowest since Oct. 8, 2010.

Raw sugar for delivery in March fell 0.9 percent to 18.02 cents a pound in New York. White sugar for December delivery retreated 0.9 percent to $484.10 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: John Deane at jdeane3@bloomberg.net

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