Hedge funds are betting that the price of cocoa will rise on concern that the deadly Ebola disease will disrupt supplies from West Africa, which produces 70% of the global supply.
Money managers raised their cocoa investments by the highest amount in 16 weeks. As governments and international organizations struggle to contain Ebola, concerns are mounting that the outbreak could spread from nations including Liberia and Guinea to neighboring Ivory Coast, the top cocoa producer.
Prices are heading for a sixth straight monthly gain, the longest streak in 12 years. Increasing consumption of chocolate in Asia is eroding world inventories as a percentage of demand to the lowest since 2010, the International Cocoa Organization estimates.
The U.S. Centers for Disease Control and Prevention said Ebola infections may reach as many as 1.4 million cases in Liberia and Sierra Leone by January without additional intervention.
“While you have a surplus [of cocoa] this year because the weather is decent, demand is picking up, and you can see that long-term shortage looming,” Damien Courvalin, an analyst at Goldman Sachs Group Inc., said in an interview. “Recently, most of that rally is driven by the risk of Ebola.”
Cocoa advanced 1.6% last week on ICE Futures U.S. in New York to $3,311 a metric ton, after touching $3,399 on Sept. 25, the highest since March 2011. The Bloomberg Commodity Index fell 0.3% last week. The MSCI All-Country World Index of equities slumped 2%, and the Bloomberg Dollar Spot Index rose 1.1%.
Exacerbating supply concerns, crops in Ivory Coast face greater risk from disease, including black pod, following heavy rains this month, according to World Weather Inc.