Investors Raise Bullish Cocoa Bets to Record as Shortages Loom

Money managers’ bets that cocoa will climb in London trading rose to a record in the latest week as a second year of shortages looms, according to data from NYSE Liffe, the derivatives arm of NYSE Euronext.

Investors were net-long, or betting on price gains, by 73,190 futures and options as of Dec. 3, the Commitments of Traders report on the exchange’s website showed today. That was up from 69,117 contracts a week earlier. The beans used to make chocolate advanced 0.1 percent in the period.

Speculators more than doubled bets on higher cocoa prices this year as consumption is forecast to outstrip production in the 2013-14 season started in October. Bean supplies will fall short of demand by 127,000 metric tons in the period, according to data from KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania. That follows a 202,000-ton shortage a year earlier, according to the researcher.

“The global cocoa market is expected to be in a tight deficit this season, and maybe even the next,” Kona Haque, a London-based analyst at Macquarie Group Ltd., said in a report e-mailed today. “We believe world prices need to be much higher than they are today in order to encourage West African producers to invest in supply expansion.”

Cocoa futures climbed 21 percent this year in London and 23 percent in New York, the second-biggest advance in the Standard & Poor’s GSCI gauge of 24 raw materials after natural gas. Prices rallied as investors bought on shortage forecasts. Ivory Coast and Ghana are the world’s two biggest growers.

CFTC Figures

Investors also are net-long on cocoa traded on ICE Futures U.S. in New York, U.S. Commodity Futures Trading Commission data show.

The net-long position in New York cocoa “makes the market highly vulnerable to a selloff should the longs have a change in heart and choose to liquidate their positions and take profit,” Haque said. “Yet we are struggling to see what it would take for the longs to make such a move.”

In robusta coffee, money managers were net-short by 3,628 futures and options as of Dec. 3, from 6,491 contracts a week earlier, the NYSE Liffe data showed. The beans used to make instant coffee and espresso gained 8.1 percent in the week.

Investors trimmed bets on rising white-sugar prices by 15 percent. They were net-long by 7,190 futures and options, against 8,467 contracts a week earlier, exchange data showed. The sweetener fell 2 percent in the week.

In feed wheat, money managers were net-short by 159 contracts, unchanged from a week earlier. The grain was little changed in the period.

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