Investors Raise Bullish Cocoa Wagers to Record on Shortage

Money managers raised bullish bets on cocoa traded in London to a record as global shortages loom for the 2013-14 season that started this month, according to data from NYSE Liffe, the derivatives arm of NYSE Euronext.

Investors were net-long, or betting on higher prices, by 64,759 futures and options in the week ended Oct. 1, the Commitments of Traders report on the exchange’s website showed today. That was the largest bullish bet since publishing of trader holdings began in 2011 and compared with the previous record of 63,419 contracts in the week ended Sept. 24. The beans for December delivery fell 0.5 percent in the latest week.

“Although speculators are heavily positioned from the long side, providing an element of risk for profit-taking, we think the net length is justified, as it is one of the few markets that look tight right now across the agri and softs space,” Kona Haque, a London-based analyst at Macquarie Group Ltd., said in a report e-mailed today. “We expect sizeable deficits for both 2013-14 and, tentatively, for 2014-15 too.”

Global cocoa supplies will trail demand by 173,000 metric tons in the year started Oct. 1, according to Macquarie. A 113,000-ton shortage is estimated for the following season, said Haque, who correctly forecast a third-quarter price rally. Cocoa entered a bull market in London last month. Global chocolate sales will rise 6.2 percent next year to a record $117 billion, according to Euromonitor International Ltd.

Exchange Inventories

“As we get closer to the Halloween and Christmas peak demand period, demand for immediate delivery will intensify,” Haque said in the report. “With cocoa stock levels at Liffe not exactly brimming, prices will need to stay high to encourage greater production among the second-tier producing countries, as well as to ration grindings.”

In robusta coffee, money managers increased their net-short position, or bet on falling prices, to 6,690 futures and options in the week ended Oct. 1, the data showed. That was up from 6,116 contracts a week earlier. The beans used to make instant coffee slid 3.7 percent in the period.

Investors reduced bets on rising white-sugar prices by 20 percent. They were net-long by 8,831 futures and options, against 11,042 contracts a week earlier, exchange data showed. The sweetener rose 0.4 percent in the period.

In feed wheat, money managers were net-short by 440 contracts, down from 451 lots a week earlier. The grain advanced 1.2 percent in the period.

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