Cocoa Climbs After Forecast of Larger Deficit; Sugar Declines

Cocoa climbed in London after the International Cocoa Organization forecast a larger supply deficit this year. Sugar and coffee fell.

Cocoa supply will be 193,000 metric tons below demand in the 2008-09 season that started Oct. 1, the London-based industry group said today. The deficit was 88,000 tons a year earlier, according to the report. Prices jumped 12 percent in January, extending last year’s 71 percent surge.

“It is a positive number,” said Sudakshina Unnikrishnan, an analyst at Barclays Capital in London. “Price moves we saw early in this quarter have been based on the market’s preoccupation with the supply side.”

Cocoa for delivery in May gained 45 pounds, or 2.6 percent, to 1,758 pounds ($2,472) a ton on the Liffe exchange.

Brussels-based bank Fortis yesterday maintained its forecast for the cocoa supply shortfall to narrow to 45,000 tons from 120,000 tons a year earlier. The industry group forecast a 2.1 percent drop in consumption this season. The market may start to focus more on demand, Unnikrishnan said.

“Demand-side fundamentals do not look terribly positive,” she said.

White, or refined, sugar for May delivery fell $1.50, or 0.4 percent, to $377.70 a ton, extending yesterday’s 5.4 percent drop. Switzerland’s economy contracted the most since 2004 in the fourth quarter, joining the U.S., Japan, Germany and the U.K. in recession.

Sugar Consumption

“We have to question whether sugar consumption continues to grow if the world economy is shrinking,” said Jonathan Kingsman, chief executive officer of Lausanne, Switzerland-based sugar broker and research company Kingsman SA. His company forecasts a 1.2 percent climb in global sugar demand this year.

London-based Czarnikow Sugar Futures Ltd. last week lowered its estimate for 2009 demand growth to 1.5 percent from 2.06 percent, partly because of the “far-reaching impact” on Chinese food exports from last year’s melamine milk scandal. Infant formula contaminated with the chemical was blamed for the deaths of at least six babies last year.

Robusta coffee for May delivery declined $17, or 1.1 percent, to $1,504 a ton, the lowest closing price since the 10- ton contract started in January 2008.

source: bloomberg