Cocoa May Extend Decline in London as Candy Makers Hold Back

By Claudia Carpenter

March 4 (Bloomberg) -- Cocoa may extend a decline from a three-month low in London on speculation candy makers are in no rush to build inventories after a supply surplus last season.

The cocoa market had a surplus of 32,000 metric tons in the 2008-09 season ended Sept. 30, more than this year’s projected deficit of 18,000 tons, the International Cocoa Organization said yesterday. Cocoa prices in New York have dropped 14 percent this year against a 5.6 percent decline in London.

“There is still a big gap between the two” markets, said Hans-Werner Lembke, managing director of Hamburg Cocoa and Commodity Office GmbH, who has covered the cocoa market for 32 years including trading and marketing beans to chocolate manufacturers. “The market should go lower because we have no deficit.”

Cocoa for May delivery closed yesterday at 2,145 pounds ($3,228) a ton on the Liffe exchange, the lowest closing price for that contract since Nov. 19. “I think the market levels should be 1,600 to 1,700 pounds, Lembke said. The May cocoa contract in New York on ICE Futures U.S. was unchanged at $2,823 a ton by 9:18 a.m. in London.

A “correction” may be due if speculators take advantage of recent price declines, Lembke said. Traders yesterday exchanged 1,650 lots of July call options at 2,500 pounds a ton, bets that London cocoa will rise almost 20 percent by mid-March.

White, or refined, sugar for May delivery fell 0.5 percent to $616.50 a ton and robusta coffee for May delivery declined 0.9 percent to $1,272 a ton.

Last Updated: March 4, 2010 04:52 EST