Cocoa extended gains to a seven-week high in New York as a price war between the world’s top cocoa producers and traders boosted demand for cheaper supplies backing beans on the exchange.
Traders are refusing to pay the high prices that Ivory Coast and Ghana are charging for their cocoa, and are turning to supplies traded on the ICE Futures U.S. bourse. The move has also roiled spreads, driving December futures to a record premium over the March contract.
“The price issues in West Africa will likely be ongoing this season,” said Andrew Rawlings, an analyst at Rabobank International in London. “They may struggle to sell what remains of the crop at the prices they want as the demand recovery remains tempered” most likely into the second quarter, he said.
March futures advanced for a fourth day, rising 0.9% to $2,539 a ton in New York. Prices climbed 3.4% on Tuesday, the biggest gain for a most-active contract since mid-September.
The rebound comes after the market had been pressured in recent months on concern that surging coronavirus cases will hurt out-of-home demand at a time when large crops in West Africa fuel a global surplus. Prices are also getting a lift from positive news on vaccines, while concerns about dry weather in parts of West Africa have also aided cocoa.
“Although a large surplus is still expected for this season, vaccine news is helping improve long-term demand outlook while concerns over dry Harmattan weather in West Africa are also supporting prices,” Rabobank’s Rawlings said.
By: Bloomberg News.
Image: Financial Times.
Review: FM.