Record Bearish Bets Keep Cocoa Near 19-Month Low as Glut Looms

(Bloomberg) -- The biggest bearish cocoa bets on record are keeping prices near a 19-month low as the market shifts into a surplus.

Money managers held a net-short position of 8,931 contracts in London in the week to Nov. 15, the most since ICE Futures Europe started publishing the data in 2011. Funds have turned bearish as an oversupply in the season that began last month will more than compensate for 2015-16’s shortage.

Cocoa futures traded in London have tumbled 21 percent from this year’s high set in July, partly as funds pulled out of the market in expectation of increased output in West Africa, which accounts for about 70 percent of global production. Prices may still rebound if traders start closing out bearish bets, Carsten Fritsch, an analyst at Commerzbank AG, said by e-mail.

"Record net-short positions show that weak fundamentals are largely priced in," Fritsch said Tuesday. "Hence, downside risks are limited."

Cocoa for March delivery added 0.3 percent to 2,001 pounds ($2,492) a metric ton by 11:58 a.m. in London. Prices touched 1,957 pounds on Thursday, the lowest since April 2015. A weaker pound helped support beans traded in the British currency. The New York cocoa contract was little changed at $2,433 a ton on ICE Futures U.S.

Funds have also started betting on lower prices in New York, according to U.S. government data compiled by Bloomberg. The net-short position of 3,018 futures and options as of Nov. 15 was the biggest since 2012.

There are already signs that supplies are improving. Deliveries from farms in top producer Ivory Coast rose for a second week, according to a person familiar with the government data. Arrivals came to 60,000 tons in the seven days to Nov. 20, compared with 55,000 tons a year earlier.

In other markets:

• Robusta coffee for January rose 0.5 percent to $2,094 a ton in London, while arabica beans for March gained 0.5 percent to $1.6405 a pound in New York.
• White sugar for March was little changed at $538 a ton in London. Raw sweetener for the same month was unchanged at 20.35 cents a pound in New York.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net. To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin