Hedge funds are placing record bets that cocoa prices will keep rising amid fears over a shortage of cacao beans, used to make cocoa, as dark chocolate becomes more popular and weather problems disrupt supply from the Ivory Coast, the FT reports.
Investor interest in cocoa has overwhelmed the traditional trade buyers and sellers, such as the confectionary and cocoa processing companies, in the cocoa futures market. Hedge funds and commodity index funds with long positions accounted for about a third of all New York cocoa contracts held, according to data from the Commodity Futures Trading Commission, the US regulator.
Cocoa prices in London touched a nine-month high of £1,037 a tonne last week, but eased to £988 on Monday. In spite of coming off last week’s highs, prices have risen nearly 30 per cent since the beginning of December. In New York, May cocoa futures traded near two-year highs of $1,815 a tonne last week.
Demand for cocoa from chocolate manufacturers has been rising as large companies such as Hershey and Cadbury Schweppes produce more dark chocolate (which contains greater amounts of cocoa than milk chocolate) to meet changing consumer tastes, and artisan producers source limited amounts of fine and organic cocoa.
Sales of milk chocolate have been falling, with Cadbury recording a 2.5 per cent drop in its Dairy Milk brand last year, according to data from Nielsen. Traders said that if the rise in prices were sustained, it could put pressure on chocolate manufacturers’ production costs.
Anthony Ward, chief executive of commodity trader Armarajo, said: “The world’s not going to run out of cacao, but they’ll have to pay more to get the right beans.”
