By Julie Wernau
Cocoa prices retraced earlier losses to avoid ending at a fresh three-year low on Thursday.
Cocoa for March delivery ended higher, up 0.3% at $2,419 a ton after falling to as low as $2,358 a ton, the lowest intraday price for the most active contract since Aug. 6, 2013.
A battered pound and developing cocoa crop have pushed long-only funds out of the market, and analysts said traders are looking to see whether the market has bottomed or will resume further losses.
"There has never been a time that demand did not respond positively to a massive price reduction. I would not expect this to change and that eventually will spur the recovery," Judith Ganes Chase, president of commoditiesresearch firm J. Ganes Consulting LLC of New York.
Europe is the biggest consumer of chocolate in the world and global cocoa contracts have dropped precipitously since the U.K. vote to exit the European Union this June. The London contract is down 12% since the vote and the New York contract is now down 23%.
The pound has dropped 16% against the dollar since the Brexit vote and market participants are pushing prices lower on the idea that the weaker currency, along with economic uncertainty in Europe, will drag on demand for chocolate.
"This is not the bull market it had been for the last few years. It's the opposite," said Peter Mooses, senior market strategist at RJO Futures in Chicago.
The Ivory Coast and Ghana, which produces the bulk of the world's cocoa, are entering main crop harvest, the larger of the two yearly crop cycles. Ghana cocoa bean purchases have been robust so far, said Price Futures Group in Chicago, but Ivory Coast arrivals are so far below expectations.
Traders said some long-positioned funds decided not to roll over positions into the March contract and instead exited those positions or placed short positions during the rollover time period. The U.S. presidential election led some funds to flee agricultural commodities for the safety of precious metals.
Data on fund positioning will be released Friday at the U.S. Commodity Futures Trading Commission.
In other markets, raw sugar for March closed down 0.7%, to end at 20.22 cents a pound; arabica coffee for March fell 0.9%, to close at $1.6295 a pound; frozen concentrated orange juice for January was up 1.7%, to close at $2.124 a pound; and March cotton ended up 1.2% at 72.54 cents a pound.
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(END) Dow Jones Newswires
November 17, 2016 16:06 ET (21:06 GMT)
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