Data showing increased cocoa consumption by European food companies like Nestle pushed the price of futures up sharply in Thursday trading. On the ICE in New York, cocoa futures for September delivery rose $108 to $3,153 per ton.
Advances on the Liffe exchange in London were more subdued, with the September contract gaining 1.6 percent to $3,717 per ton.
“Funds are probably behind the move and squeezing physical buyers,” Eugen Weinberg of Commerzbank AG in Frankfurt told Bloomberg News.
In a letter to the NYSE Liffe, a group of 16 European cocoa companies accused unnamed large players of manipulating the price of cocoa futures, “bringing the London market into disrepute,” reported the Financial Times.
It remains unclear how much of the price movement is down to a genuine increase in demand, but on Wednesday, the European Cocoa Association reported that the second quarter of fiscal year 2010 saw a 12.7 percent rise in cocoa processing.
A number of the groups complaining to the Liffe are end-users, usually cocoa processors who use the futures contracts to hedge against their exposure to the market.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.