NEW YORK, May 2 (Reuters) -
A massive fund liquidation movement continued on Thursday in the cocoa market, where losses for the week so far approach 30%, and have spread to coffee futures with both arabica and robusta contracts posting heavy losses on the ICE exchange.
Cocoa prices in New York fell $721 per metric ton on Thursday, or 8.7%, to $7,563 a ton just a day after losing nearly $1,000 per ton. The contract lost 29% this week so far.
Prices for the chocolate-making ingredient in London fell 9.6% to 6,555 pounds per ton, accumulating a 27% loss for the week.
"This is a volatile and unprecedented cocoa market," said Citi in a note to clients.
Cocoa had gained 60% last year and more than 100% this year in a brisk rally supported by the deterioration of the outlook for cocoa supplies as West African countries reduced production. But it started to drop sharply last week.
Citi said that the abrupt price fall could indicate expectation of demand destruction for the beans going forward, as a reaction to rising chocolate prices, or a possibility for a more balanced supply & demand situation in the 2024/25 season (Oct-Sept).
As cocoa prices rose last year and earlier in 2024, there have been reports of
rising production
due to better crop care.
Fund selling spread to coffee markets on Thursday, traders said.
Arabica coffee futures fell 4.6% to $2.061 per lb, while robusta coffee prices, which had hit an all-time high last week, fell 7.5% at $3,680 a ton.
"The number of funds participating on the long side (on coffee) was at record high," said a U.S.-based coffee trader. "My interpretation was that there were a lot of funds not versed in the peculiarities of coffee moves and probably got caught a little flat footed, and as the old adage goes: if everyone is long, who is left to buy?”
"The move up was likely overdone and unexpected and now coming down the same," said Stephen Hurst, chief trader at Mercanta Coffee.
He added that robusta coffee prices were ripe for a correction as they recently reached prices that equalled those of good quality arabica in some countries, something unusual.
Sugar prices escaped the rout in soft commodities. Raw sugar gained 0.2% to 19.25 cents per lb, while refined sugar rose 0.4% at $570.50 a ton.
(Reporting by Nigel Hunt and Marcelo Teixeira; editing by Jason Neely, Vijay Kishore and Alan Barona)
