Cocoa prices rise as grind data fuels deficit talk

by Agrimoney.com

Cocoa futures extended their rally, hitting their highest in nearly nine months in London, after the quarterly processing data season ended on a strong note, with the North American grind rising far more than investors had expected.

The cocoa grind in Canada, Mexico and the US reached 126,044 tonnes in the April-to-June quarter, up 11.8% year on year, the sharpest rise in three years, the National Confectioners Association said.

The increase was far more than the 2-5% increase that investors had expected, and followed unexpectedly strong data from Asia on Wednesday, showing a 2% rise to 153,792 tonnes in the regional grind.

Investors had expected a decrease in Asian volumes, citing high stocks of cocoa powder seen remaining following a buying spree last year, largely at higher values.

Such expectations had gained credence after the grind on Monday when the grind in Malaysia, Asia's top cocoa processor, was shown falling 3.1% to 72,191 tonnes, getting the quarterly cocoa grind reporting season off to a slow start.

'Demand recovering'

The North American data show that "global cocoa demand appears to be recovering further", Commerzbank said.

Indeed, the data could herald an upgrade by the International Cocoa Organization to its forecast of a 0.9% rise in world cocoa demand in 2012-13.

This figure "could prove too low after the latest processing figures from Europe, Asia and North America", the bank said.

"The supply deficit could therefore also be higher than the ICCO's currently expected 60,000 tonnes."

Data revisions ahead?

Expectations for supplies have also taken a knock with a report that Ivory Coast, the top producing country, is expecting a 1.4m-tonne crop in 2013-14, a drop of more than 100,000 tonnes on the result for this season, which ends in September.

This "would also suggest a supply deficit in the coming crop year", an idea which "should lend further upward momentum to cocoa prices", Commerzbank said.

Indeed, New York cocoa futures for September delivery gained 1.0% to $2,370 a tonne on Friday as of 07:00 local time (12:00 UK time), taking to 11% their recovery from a late-June low.

London futures for September reached £1,626 a tonne, the contract's highest since October, before easing back to £1,620 a tonne, up 14% from the late-June nadir.

The rally has also been spurred by Ivory Coast's revelation that it had sold 750,000 tonnes of 2013-14 cocoa forward, more than the market had expected and implying less selling pressure for the market to absorb ahead.

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