Cocoa (NYBOT:CCU13) is heading for its best quarter since 2009 as dry weather and crop delays in West Africa, the main growing region, send prices toward a two-year high and raise costs for chocolate makers.
Demand will exceed output by 119,000 metric tons in the 12 months starting in October, the first shortage in four years, according to Macquarie Group Ltd. Prices will enter a bull market, rising 5.8% to 1,750 pounds ($2,718) a ton in London by the end of 2013, the highest since September 2011, according to the median of nine estimates from traders surveyed by Bloomberg. Hedge fund bets on higher prices in New York are near a five-year high.
The main-crop harvest in Ivory Coast, the top producer, may be a month later than usual and MDA Weather Services says rain in southern growing areas has been more than 25% below normal. World output will drop 1.2% to a four-year low at 3.94 million tons in 2013-14, with 1.42 million tons from Ivory Coast, Macquarie estimates. The world confectionery market is worth $114 billion, and Commodities Risk Analysis estimates the industry uses as much as 75% global cocoa supplies.
“The dry period did start earlier than normal,” said Jonathan Parkman, co-head of agriculture in London at Marex Spectron Group Ltd., who has followed the cocoa market for more than 30 years. “To get the market to come down, we will need to see better weather than we’ve seen.”
Cocoa rose 13% since the end of June on NYSE Liffe in London to 1,654 pounds a ton, set for the best quarter since September 2009. The Standard & Poor’s GSCI gauge of 24 commodities gained 5.6% in the third quarter as the MSCI All-Country World Index of shares rose 4.9%. Treasuries lost 0.7%, the Bloomberg U.S. Treasury Bond Index shows.
London cocoa jumped 19.2% since March, with New York futures entering a bull market on Aug. 7 with a gain of 20% from the 14-month closing low on March 6. Cotton is the only other commodity in the S&P GSCI Agricultural Index in a bull market.
Money managers increased bets on rising prices in London for five consecutive weeks as of Aug. 6, with net-long positions reaching 46,601 contracts, the most since October, NYSE Liffe data show. Bullish wagers on ICE Futures U.S. in New York jumped 41% in the past four weeks to 44,658 contracts.