Cocoa Edges Higher As Market Eyes Weather, Demand

Neena Rai

  Cocoa futures rose slightly in early European trading Monday, with dealers

watching the weather in top-producing West Africa while keeping in mind a

recent surge in demand for the chocolate-making ingredient.

  At 0950 GMT, Liffe cocoa futures for December delivery traded 0.3% higher at

GBP1,706 a metric ton. Last Tuesday, futures hit a one-year high of GBP1,729 a

ton.

  Matt Bradbard, vice president of Managed Futures and Alternatives at RCM

Asset Management, expects this won't last.

  "Extreme dry weather in West Africa, a key growing area, and

higher-than-expected demand for chocolate has lifted cocoa to one-year highs

but the likelihood of further advances are decreasing."

  He expects a setback in the near future and for the market to improve toward

the end of the year.

  West Africa produces 70% of the world's crop.

  Robusta coffee futures slipped as weak New York arabica prices and

expectations of a large crop out of top producer Vietnam weighed on the market.

November robusta coffee futures traded 0.3% lower at $1,672 a ton.

  "Global coffee prices continue to fall in light of excess capacity and

sliding currencies while the demand struggles to recover," said Rao Achutuni,

president of agricultural research firm EGSI consulting.

  He said slow economic growth in the European Union sapped demand and led to

huge surpluses. The 28-nation bloc consumes more than a third of the world's

agricultural commodities.

  In other commodities, December London sugar futures slipped 0.6% to $483.50 a

ton as technical charts signal further consolidation could lie ahead this week.

November European wheat futures fell 0.15 to EUR185.50 a ton.

  "The European markets are under the pressure of a strong euro. Wheat and corn

markets are quoting to a month low level, the bullish movement observed in

August seems to be forgotten," risk manager Agritel said.

  "European operators are monitoring the crop development in the Black Sea

area, where the rains are hampering the harvests. Corn imports in Europe are

expected to be high, with prices which remain attractive and weighing on French

prices," it added.