Cocoa Jumps on Concerns of El Niño, Bean Quality
21 March 2017 - 8:17AM
Dow Jones News
By Carolyn Cui
Cocoa futures soared 5% on Monday, marking the largest one-day
gain in five years, as traders added to their bullish bets on
concerns about cocoa supplies.
New York cocoa for May delivery jumped 5.1% to settle at $2,116
a ton on the ICE Futures U.S. exchange. Monday's move represented
the most active contract's largest one-day percentage increase
since March 2012.
Reports of poor cocoa bean quality in Ivory Coast and other
African growing countries, along with forecasts of a likely
comeback of El Niño, a weather pattern that had disrupted cocoa
production less than a year ago, finally ignited a bullish reaction
in the cocoa market, which was one of the worst-performing
commodities last year.
"I think it was just overdone with how much we have sold off,"
said Peter Mooses, senior market strategist at RJO Futures.
Prices were beaten down by prospects of big production in West
Africa, the world's largest growing region. Since late-2015, cocoa
lost more than 40% before hitting a multiyear low in early
March.
In recent days, news reports suggested that port arrivals in
Ivory Coast could fall in coming weeks as more cocoa beans were
rejected by export companies due to small size and poor
fermentation. Farmers held on to the cocoa beans longer than
previous years as prices tumbled, causing the quality to
deteriorate.
"Now, we're getting some news that the big productions there are
seeing some damage; that's driving the prices to move higher," Mr.
Mooses said.
On the other hand, the Australian Bureau of Meteorology said
that six of eight models it tracked suggested that an El Niño may
develop in July. The weather changes that are associated with El
Niño tend to affect crops in the tropical Pacific region, such as
cocoa, sugar and rice.
Some of the buyers seemed to be attracted back to the market. In
the week ended March 14, agricultural markets as a whole saw a
record reduction of net long positions of 223,374 contracts over
the previous week, but cocoa bucked the trend, gaining 1,033 net
long positions during the week, according to Rabobank.
On Monday, Mr. Mooses said that he saw speculative traders enter
the market, betting on prices to rise further.
In other markets, raw sugar for May lost 2.6% to settle at 17.70
cents a pound, arabica coffee for May added 2.3% to close at
$1.4525 a pound, frozen concentrated orange juice for May rose 1.1%
to settle at $1.8285 a pound, and May cotton shed 1.3% to end at
77.33 cents a pound.
Write to Carolyn Cui at carolyn.cui@wsj.com
(END) Dow Jones Newswires
March 20, 2017 17:02 ET (21:02 GMT)
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