By Julie Wernau
Cocoa futures wavered on Tuesday, ending at loss for a third
straight session, as fears about the Chinese economy outweighed a
day's gains for Chinese stocks.
The cocoa industry is expecting China to be the next great
frontier for consumption of cocoa, the main ingredient in
chocolate, but demand for the product has softened recently and
weak economic data released this week further fueled concerns that
a weakening economy there would cut into demand for chocolate's
main ingredient.
Cocoa for September ended down 0.03% at $3,165 a ton, after
rising as high as $3,188 in early trading, on the ICE Futures U.S.
exchange. Analysts warned that further losses could be on the
horizon with more economic data on tap for later this week.
Commodities haven't hit bottom yet, said Norbert Ruecker, head
of commodities research at Julius Baer. "While commodities seem
oversold and the extended positioning bears the risk of a
short-covering rally, we refrain from bottom-fishing in the asset
class," he wrote in a note. "The fading supercycle remains the
headline story and structural cost deflation is set to keep
commodity prices lower for longer."
In July, cocoa futures fell to their lowest level in more than a
month, after demand data from Asia, viewed as a key growth market
for the luxury bean, showed a steep decline. Disappointing
manufacturing data out of China on Monday fueled further fears
about the stability of the Chinese economy.
The Cocoa Association of Asia said commercial demand in the
region for grinding--the process by which producers crush roasted
cocoa nibs to release cocoa butter and eventually turn them into
chocolate products--fell 12% in the second quarter from year-ago
levels. It was the fourth consecutive decline, and followed
evidence of a decline in North America and barely perceptible
growth in Europe.
"The global oversupply in commodities as a whole gets amplified
by China," said Chris Narayanan, head of agricultural commodities
research at Societe Generale in New York.
In other markets, raw sugar for October rose 1.1% to end at
11.01 cents a pound, breaking a three-day losing streak that had
prices at their lowest in six-and-a-half years. White sugar, which
is traded in London, has been trading at a premium to raw sugar,
said Robin Shaw, analyst at Marex Spectron, which could be driving
up demand for raw sugar as refineries seek to profit from
relatively-low-priced raw sugar that can be refined and sold at
high prices.
Frozen concentrated orange juice for September delivery jumped
3% to end at $1.3195 a pound, the highest since Feb. 18 as the
height of hurricane season approaches. Arabica coffee for September
rose 0.8% to close at $1.249 a pound and cotton for December fell
0.6% to close at 63.64 cents a pound.
Write to Julie Wernau at julie.wernau@wsj.com
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