Cocoa hits record high as market frets over supply deficits
Recasts, updates prices, adds details
By Maytaal Angel
LONDON, Dec 18 (Reuters) -Cocoa prices hit record highs on Wednesday as fears escalated there will be more demand than supply of the chocolate ingredient for a fourth successive season.
Dealers are lowering their supply expectations for West Africa following dry weather, while speculators are once again taking on new long futures positions or bets on price gains.
"Prices appear to want to move higher. We have not yet seen a counter-trend move," said broker StoneX.
Physical market deals have nearly ground to a halt meanwhile and the market is battling payment delays as traders are strapped for cash given soaring trading costs in the futures market, an industry source told Reuters.
New York cocoa futures on the ICE exchange CCc1, used as a benchmark to price physical cocoa around the world, hit an all-time high of $12,636 a metric ton, up 7.4%, and by 1601 GMT were 7.2% higher at $12,607 a ton.
"Things are quite tough these days. People have tight cash (flows) so they're focussing on delaying payments to have enough financing lines for their margin calls," said the industry source.
Margin calls are downpayments that cover a portion of the potential losses traders might face on their futures position. The higher the futures price, the higher the margin calls.
Cocoa arrivals at ports in top grower Ivory Coast are up more than 30% so far this season versus last, but they are lagging the four prior seasons by between 10% and 28%, according to StoneX.
This, coupled with poor output in no. 2 grower Ghana in recent seasons, has left stocks held in ICE warehouses CC-TOTAL-TOT at just 1.405 million bags, their lowest ever levels.
"West Africa received no rainfall over the past 24 hours, continuing the recent trend, and World Weather Service sees little change over the next 7-10 days," said broker ADMISI.
Farmers in Ivory Coast said on Monday the lack of adequate rains and heat could weigh on the development of the October-to-March main crop.
London cocoa futures on the ICE exchange LCCc1, also used to price physical cocoa the world over, rose 6.6% to 9,881 pounds per ton, not far off April's record peak of 10,265 pounds.
In other soft commodities traded, arabica coffee futures KCc2 rose 1.5% to $3.2965 per lb, still some way off last week's record high of $3.4835, while robusta coffee LRCc2 fell 0.3% to $5,152 a ton.
Raw sugar SBc1 fell 0.7% to 19.71 cents per lb, having hit a three-month low of 19.55 cents, while white sugar LSUc1 fell 0.2% to $513.80 a metric ton.
Reporting by Maytaal Angel; Editing by Mohammed Safi Shamsi and Jan Harvey
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