US cocoa futures rocketed to close on Tuesday at a nearly four-year peak on fund buying and the medium-term outlook is for prices to head higher because of tight supplies and an increase in demand, traders said.
"The mid crop from West Africa is expected to be smaller this year, so I think that's going to be supportive of prices," said Rohit Savant, commodities analyst for CPM Group. "Also demand isn't backing down.
It's been consistently strong over the last two quarters." The New York Board of Trade's spot month May contract surged $86, or 4.8 percent, to close at $1,864, after trading from $1,803 to $1,870, a high last seen on a spot monthly basis in May 2003.
July climbed $85 to $1,890, in dealings from $1,836 and $1,890. The rest settled from $82 to $85 higher. On the IntercontinenalExchange New York Board of Trade's electronic platform, May was up $88 at $1,866, at 1:13 pm EDT (1713 GMT) while July climbed $87 to $1,892.
Electronic trading ends at 3:15 pm Farmers in top cocoa-grower Ivory Coast have described the drought as the worst in living memory and said they expected to harvest far less than usual in the coming April-September mid crop, the smaller of the two six-month growing cycles.
Global supply deficit forecasts for 2006/07 range from the International Cocoa Organisation's 103,000 tonnes to that of independent analyst Hans Killeen at around 250,000.
Cocoa prices will continue to rise over next four to six weeks, Savant said. "Over the next week or so, it might off a bit because this move was pretty significant for a day.
Maybe over a couple of weeks it should climb back to these levels but I don't see it dropping down significantly," Savant said.
In London, cocoa futures surged to a 3-1/2-year peak in late trade on speculative and fund buying underpinned by tight supplies and rising demand, dealers said. Life's second month July rose well above 1,000 pounds a tonne, the highest for the second month since September 2003.
Estimated volume by New York Board of Trade's around noon was at 7,195 lots, compared with 5,733 officially tallied on Monday when 3,756 of these traded electronically.
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