Cocoa Trades Higher Again as Supply Concerns Loom

Neena Rai

  LONDON - Cocoa futures prices gained ground in European trading Monday as

concerns over supply shortages helped extend the increases made in the prior

session.

  "Cocoa futures rallied on Friday due to speculation that weeks of heat in

Ivory Coast and Ghana could cause serious crop damage, outweighing the fact

that rain was falling over the largest two cocoa producers of West Africa,"

said Vanessa Tan, investment analyst at Phillip Futures.

  "This rise...reversed from previous sessions as it was highly unlikely that

the rain could undo the heat stress experienced by the cocoa crops previously,"

she said. "It remains to be seen if the rainfall could significantly benefit

the stressed cocoa crops."

  December cocoa futures traded 1% higher at GBP 1,710 a metric ton at 1025

GMT, after hitting GBP 1,713 a ton--the highest level since Sept. 19.

  Elsewhere, November robusta coffee futures firmed 0.8% to $1,722 a ton.

Market sentiment remains positive after a much larger-than-expected drawdown in

certified stocks announced last week.

  Certified robusta stocks held in NYSE Liffe-nominated warehouses fell to

60,380 tons as of Sept. 30, down from 74,890 tons Sept. 16.

  "The equilibrium price of robusta coffee...is approximately $1,850 per ton in

the short, short term," said Mark Nucera, president of M.A. Nucera consultancy.

"Higher demand this fall or reductions in supply could bring a price closer to

$2,400 per ton considering how tight the robusta market is presently.

  "The media has focused on the larger Vietnam Robusta crop as a bearish

indicator.  Well, Vietnam's increased crop, if not impacted by the recent

cyclones (which seems highly unlikely), will be offset by a lower crop in

Indonesia available for export and in Africa," he said.

  Meanwhile, December sugar futures firmed 0.4% to $494.30/ton, while European

Union November wheat futures nudged 0.1% up to EUR 194.75 a ton, with the

market awaiting further news to any rain damage to CIS-region crops.