Cocoa Rebounds After Grindings Data Beat Expectations

By Leslie Josephs 

NEW YORK--Cocoa futures prices bounced up on Friday, after a report showed processing of the key chocolate ingredient in North America hit a record high last quarter.

The December cocoa contract on the ICE Futures U.S. exchange settled 1% higher at $3,118 a ton.

In the July-September period, North American factories processed 138,027 metric tons of cocoa beans, according to data from the National Confectioners Association. It was the largest amount processed since 2000, the farthest back data goes as posted on the trade group's website.

The amount processed was 4.6% more than the like year-earlier period, which had also been a record. Analysts and processors had predicted the grindings would be little changed from the previous year, with estimates ranging from a 1% decrease to a 1% increase.

The quarterly grindings, or tonnage, of beans processed into cocoa powder and other products used in confections are considered a barometer for chocolate demand.

"The grind is stronger than forecast, and the anticipated degradation of consumption due to price hikes is slow to materialize," said Kip Walk, head of sustainability at processor Blommer Chocolate Co., which was included in the NCA's survey.

In July, Hershey Co. (HSY) and a Mars Inc. unit raised prices for U.S. chocolate products to offset rising costs.

Cocoa prices are up 15% this year due to strong demand and concern the Ebola outbreak in West Africa, the epicenter of the disease, would hinder the exportation of cocoa beans. West Africa is the source of more than two-thirds of the world's supply of cocoa.

In other markets, arabica-coffee futures prices slipped on expectations of rainfall in dry areas of Brazil's coffee belt. The world's top coffee grower was hit by drought earlier this year, which clipped output this season. Continued dry weather fueled worries over the size of next season's harvest, propelling futures prices to nearly three-year highs.

December arabica fell 3% in price to $2.1065 a pound, the lowest settlement since Oct. 3.

Despite some forecasts for rainfall next week, some experts argue the damage has already been done. "Light rains will not solve the problem," said Thiago Cazarini, founder of brokerage Cazarini Trading Company in Varginha, Brazil. "The market trembles every time weather agencies report future rains, but the truth is one-week rains will not solve the problem and the next crop is shrinking by the second."

December cotton fell 0.9% to a two-week low of 63 cents a pound, after the U.S. Department of Agriculture reported net cotton-export sales of upland-variety fiber dropped 90% in the week ended Oct. 9 from the previous week after Chinese buyers canceled their purchase of close to 15,000 bales of cotton.

Orange-juice concentrate for November fell 0.4% to end at $1.35 a pound, while March sugar eased 0.3% to 16.62 cents a pound.

Write to Leslie Josephs at [e-mail]

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