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May Cocoa Premium Over July Doubles on Shortfall Before Delivery

The premium May cocoa futures command over the July contract more than doubled in London on speculation European inventories will be too small to meet the delivery when the May contract expires this week.

Cocoa for delivery in May was 32 pounds ($49) a metric ton more expensive than July futures on NYSE Liffe, up from 13 pounds on May 10 and compared with a discount on May 8. Backwardation, when prices for near-dated contracts are higher than later ones, may signal scant supply. Trading of May futures ends May 15 and the delivery will be the next day.

“Supplies problems are firming the spread considerably at the moment and indeed some warehouse shortage could be there,” Edward de Wismes, an agricultural futures broker at Aurel BGC in Paris, said by e-mail today. “There could a supply shortfall before the delivery.”

Cocoa for delivery in July settled 1.3 percent higher at 1,547 pounds a ton on NYSE Liffe in London and the May contract climbed 2.5 percent to 1,580 pounds.

Cocoa delivered against the March contract totaled 72,350 tons, the most since the December 2010 futures expired. Buyers of cocoa on NYSE Liffe can take delivery of no more than 75,000 tons, according to limits that came into force before the December futures expired last year. Most of the beans delivered were from top producer Ivory Coast, followed by Cameroon and Nigeria, exchange data showed.

“The spread should stay firm until the last trading day on speculation of limited supplies in European warehouses,” Jerome Jourquin, head of agricultural commodity derivatives at brokerage Aurel. said by e-mail today.

Cocoa stockpiles with a valid grading certificate in warehouses monitored by NYSE Liffe were 89,580 tons as of April 29, exchange data showed. Beans under other categories were 52,570 tons. Liffe will update inventory data this week.

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