Bloomberg News

Cocoa Caps Longest Slump in 50 Years as Ivory Coast Supply Rises

December 11, 2011

Dec. 9 (Bloomberg) -- Cocoa prices plunged, capping the longest slump in 50 years, on signs that supplies are rising in Ivory Coast, the world’s biggest producer.

Deliveries to ports this season from farms in Ivory Coast climbed 5.8 percent through Dec. 4, a document from the industry’s regulators showed today. Voters in the West African country will cast ballots on Dec. 11 in the first legislative election in more than a decade that’s likely to shore up support for President Alassane Ouattara, who’s pledged to overhaul the cocoa industry to increase output.

Prices have dropped 45 percent since touching 32-year high in March, when a civil war disrupted supplies following a disputed November election. The commodity dropped as global output rose and slowing economies in the U.S. and Europe signaled supply may exceed demand for a second year. The slump may lower costs for companies including Hershey Co., Nestle SA and Barry Callebaut AG, the world’s top bulk-chocolate maker.

“Increasing availability of cocoa from Western Africa is still the dominant force in the market,” Jack Scoville, a vice president for Price Futures Group in Chicago, said in a report. “Traders are also worried about the economic situation in Europe.”

Cocoa for March delivery retreated 3 percent to settle at $2,067 a metric ton at 12:02 p.m. on ICE Futures U.S. in New York, after touching $2,053, the lowest since November 2008. The price fell for a 12th consecutive day, the longest slide since at least 1961, according to Bloomberg data.

Surplus Outlook

Global supplies will exceed demand for the second straight year, according to the London-based International Cocoa Organization. The surplus last season totaled 341,000 tons, Lysu Paez, an analyst at Natixis, wrote in a report yesterday.

“Cocoa prices may not recover much over coming weeks,” Paez said.

The Standard & Poor’s GSCI Index of 24 raw materials fell as much as 1 percent today to the lowest since Nov. 25. The gauge has dropped 15 percent since reaching a 32-month high in April as Europe’s debt crisis escalated.

Cocoa has slumped 32 percent in 2011, the second-biggest decline among the commodities tracked by the GSCI. Cotton plunged 38 percent this year.

“The macroeconomic scenario is changing by the hour,” Drew Geraghty, a broker at ICAP Futures LLC in Jersey City, New Jersey, said in a telephone interview. “Most agricultural commodities are down today.”

On NYSE Liffe in London, cocoa futures for March delivery tumbled 2.3 percent to 1,338 pounds ($2,093) a ton.

--With assistance from Chris Kay in Abuja and Isis Almeida in London. Editors: Millie Munshi, Steve Stroth

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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