DJ ICE Cocoa Review: Prices Higher As Supply Scare Fades
NEW YORK (Dow Jones)--Cocoa prices rose Friday for the first time in a week
as the market recovered its bearings following a false supply scare in Europe.

Nearby cocoa for September delivery cocoa settled $50, or 2%, higher at
$2,966 a metric ton on ICE Futures U.S.

Despite Friday's gains, cocoa prices still lost nearly 6% this week after it
was uncovered that most of the exchange stock on London's NYSE Liffe cocoa
market was delivered last week to a speculator rather than a commercial entity
that had need for the cocoa. The weak demand cue sent prices spiraling, though
speculative buying supported September at $2,900.

"Cocoa is still correcting in the wake of the July squeeze in London," a New
Jersey cocoa broker and analyst said.

End-users of cocoa, like confectioners and food manufacturers, have
confronted the Liffe with issues of market transparency and speculation that
they say can lead prices out of line with fundamentals. Those end-users said
speculative traders, such as banks and hedge funds, are driving up the market
for their own profit. Typically, only an confectioner or food manufacturer
would take delivery of exchange cocoa stocks as a last-ditch effort because the
beans weren't available on the cash market.

"The market was very disappointed in the fact that info coming out of that
purchase wasn't nearly as bullish as was first hoped," said James Cordier,
founder of OptionSellers.com in Tampa.

September cocoa will now gravitate toward the top of its recent price band
at $3,150 to $3,200, Cordier said. Fundamentals remain supportive to cocoa,
Cordier said.

The International Cocoa Organization estimates world production will fall
nearly 1% short of demand in the current 2009-10 season, which ends Sept. 30.
The amount of beans ground by confectioners to make chocolate is anticipated to
be 4% higher than last year at 3.579 million tons, the organization said in
late May.

Volume was estimated 12,468 contracts to the point of settlement, according
to exchange data. In options, approximately 30 calls and 624 puts traded on the
floor in the same time frame.

ICE cocoa open interest--the number of active positions left at the end of
the session--decreased by 540 positions Thursday to total 126,022, the exchange
reported.

Liffe September cocoa settled GBP24, or 1%, higher at GBP2,297 a ton.
Close Change Range (To the point of settlement)
Sep $2,966 +$50 $2,916-$2,971
Dec $2,993 +$51 $2,949-$2,998