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Cocoa Caps Biggest Loss Since August as African Harvest Advances

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Cocoa Beans
A farmer gathers cocoa beans in Zamblekro, Ivory Coast. Increasing crop collection is helping to replenish inventories of the chocolate ingredient. Photographer: Sia Kambou/AFP via Getty Images

Dec. 30 (Bloomberg) -- Cocoa futures posted the biggest loss since August on speculation that supplies will improve as the harvest advances in West Africa, the world’s leading growing region.

Crop areas in Ivory Coast and Ghana, the top producers, will be “seasonally dry” in the next few weeks, allowing farmers to accelerate harvesting, Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas, said Dec. 27. From Oct. 1 to Dec. 15, bean deliveries to Ivorian ports jumped 43 percent from a year earlier, according to Commodities Risk Analysis in Bethlehem, Pennsylvania.

Increasing crop collection is helping to replenish inventories of the chocolate ingredient. Cocoa-bean stockpiles monitored by ICE Futures U.S. are heading for the first monthly gain since May and are at the highest since Nov. 22. Prices surged 21 percent this year amid signs that supplies would fall short of demand, raising costs for food makers including Nestle SA, Barry Callebaut AG and Lindt & Spruengli AG.

“The progress of the West African harvest and very good arrivals from Ivory Coast are giving traders a bit of a signal to take profits,” Sterling Smith, a futures specialist at Citigroup in Chicago, said in a telephone interview. “The commodity has done very well, and is typical to see the funds do some end-of-the-the-year adjustments.”

Cocoa futures for March delivery slumped 2.6 percent to settle at $2,712 a metric ton at 11:59 a.m. on ICE in New York, the biggest slide since Aug. 21. Prices touched $2,692, the lowest for a most-active contract since Nov. 15.

Supply Deficits

Consumption will top output by about 70,000 tons in the 12 months started Oct. 1 and deficits will persist through 2018, a six-year stretch that would be the longest since the data began in 1960, according to Laurent Pipitone, head of statistics at the International Cocoa Organization in London. Prices may rally to $3,200 by the end of 2014, according to the median of 14 trader estimates in a Bloomberg News survey published this month.

Growing demand in emerging markets, led by Asia, has contributed to the rally this year just as an aging tree population in West Africa curbs yield potential. Prices for cocoa butter, a byproduct of the commodity used in chocolate bars, climbed 75 percent in 2013.

Hedge funds and other large speculators held a cocoa net-long position, or bets on a rally, of 74,724 U.S. futures and options contracts as of Dec. 17, government data show. That’s about 88 percent higher than a year earlier.

While “in the near term, the dry weather should help alleviate some of the bullishness in the markets, we may still see the market bounce after the new year,” Hector Galvan, a senior commodity broker at RJO Futures in Chicago, said in an e-mail.

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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