Bloomberg News

Cocoa Options Show Increase in Bets on Price Rise by December

October 06, 2011

Oct. 6 (Bloomberg) -- Bets cocoa will rise to as high as $2,750 a metric ton by December surged this month after prices for the chocolate ingredient fell to the lowest level since 2009, ICE Futures U.S. options trading shows.

Investors held 1,651 contracts giving the right to buy cocoa in December at $2,750 as of Oct. 4, up from 151 lots on Sept. 30, according to exchange figures. Bets the price will be $2,700 also increased, with investors holding 5,135 contracts, up from 135 lots on Sept. 30, exchange data showed. Investors are also seeing cocoa at $2,650, with bets increasing to 4,001 lots as of Oct. 4, up from 5 on Sept. 30, according to the data. These are the three December call options with the biggest changes in activity this month.

Cocoa for December delivery was up $22, or 0.8 percent, to $2,644 by 1:56 p.m. London time on ICE Futures U.S. in New York. Calls give the right to buy.

“While there are good prospects for the main crop in West Africa, there is still a lot of uncertainty associated with the mid-crop,” Keith Flury, an analyst at Rabobank International, said by phone from London today. “The move in calls could be playing a role in the market retracing recent losses.”

Cocoa fell to $2,540 a ton on Oct. 4, the lowest price since July 9, 2009. The price slid on speculation crops in West Africa would be larger than initially estimated, leaving a small surplus in 2011-12 after supplies exceeded demand by a record 325,000 tons in the 2010-11 season, according to the International Cocoa Organization.

Bean supplies will exceed demand by 12,000 tons in the 2011-12 season which started this month, according to a Bloomberg survey of 11 traders, brokers and analysts published on Sept. 23. The market will have a small surplus in the season started October, Jean-Marc Anga, ICCO executive director, said at a press conference in London on the same day.

--Editors: Sharon Lindores, John Deane

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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