Sun, Oct 22, 2017 page14

• Funds signal post-Halloween chocolate gain

  • Bloomberg
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  Chocolates are cheaper for Halloween, but prices are likely to rebound by Christmas thanks to rising demand for cocoa beans.

  A global surplus sent cocoa prices plunging for most of the past two years, which helped to temper retail chocolate costs.

  There are signs that the overhang is beginning to ebb as consumers eat away the excess.

  

  An employee arranges camera-shaped chocolate pieces at the Chocolate Show in London on Friday.

  Photo: AP

  Grindings, a measure of demand, have been climbing globally. That has caught the attention of hedge funds, who are finally starting to back away from bets that the commodity’s slump will continue.

  “Low prices are the cure for low prices,” said Harish Sundaresh, a portfolio manager and commodities analyst in Boston for the Loomis Sayles Alpha Strategies team, which oversees US$5 billion. “A combination of improving grinding demand from chocolatiers ahead of the holiday season, over-crowded short positioning and persistently low prices over the past year has improved the price outlook.”

  Cocoa futures traded in New York have erased this year’s losses. Prices that were down as much as 17 percent in late April on Friday settled at US$2,138 a tonne, up 0.6 percent since the end of December last year.

  Hedge funds held a net-short position, or the difference between bets on a price increase and wagers on a decline, of 18,446 futures and options in the week that ended on Tuesday, according to US Commodity Futures Trading Commission data released on Friday.

  That compares with 21,560 a week earlier and was a sixth straight contraction.

  In the four-week period that ended on Oct. 8, average retail unit prices for chocolate were down 7.3 percent from the prior period, according to data from Chicago-based researcher IRI compiled by Bloomberg Intelligence.

  Americans are expected to dole out US$2.7 billion on the treats, as total spending on Halloween climbs 8.3 percent to US$9.1 billion, the National Retail Federation estimated.

  About 75 percent of US households hand out sweets to trick-or-treaters, and chocolate comes in as the clear favorite, according to the National Confectioners Association.

  Ivory Coast, the world’s biggest cocoa grower, has tightened requirements to issue export licenses.

  The nation is also in conversations with rival and No. 2 producer Ghana on how to boost earnings from the crop after the price slump cut government revenues and incomes for hundreds of thousands of small-scale farmers.

  The World Bank has pledged its support for the nations’ plans to develop a coordinated strategy, which could include common policies on the marketing, storage and processing of cocoa.

  The countries account for more than 60 percent of global supplies.

  The revised export rules along with the possibility of more clampdown has “raised uncertainty about the speed of supplies reaching the market,” said Albert Scalla, senior vice president for INTL FCStone in Miami.

  Cocoa inventories at warehouses monitored by ICE Futures US have fallen for 42 straight days, the longest slide since November 2014.

  The drop comes partly amid the slowing pace of deliveries from Ecuador, the fourth-largest grower, after US officials rejected some shipments because of traces of a noxious weed in some cargoes.

  The stockpiles are about 54 percent higher than a year earlier, though, helping to provide some cushion to the market.

  Still, inventories could keep dropping because cash-market prices have gotten so high that it has become less attractive to deliver beans through the exchange, Scalla said.

  If futures breach resistance above US$2,200, the next upside target sits at US$2,300, he said.

  Other commodities:

  Spot gold dipped 0.7 percent to US$1,281.52 an ounce. The precious metal lost 1.8 from last week’s US$1,304.60 an ounce.

  Copper was on Friday little changed at US$3.17 a pound, up 1.2 percent from last week’s US$3.13 a pound.

  Rhodium was at US$1,550 an ounce on Friday and reached the highest since early 2012.

  Ruthenium climbed to US$85 an ounce, touching the highest since 2013.
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