By Julie Wernau
Cocoa ended its last trading day of the year Friday down 34% for 2016, its worst year since 1999 and the year's worst-performing major commodity.
Cocoa for March lost 1.8% Friday to end the year at $2,126 a ton on the ICE Futures U.S. exchange, the lowest close for the most active contract since March 29, 2013.
"Supplies keep piling up and that has created a really negative tone in this market," said Peter Mooses, senior market strategist at RJO Futures in Chicago. "From mid-August until now, it's just a straight dump down to the bottom."
The cocoa market is a solid short bet for the first time in 4 1/2 years. For the last three weeks, more hedge funds and money managers have been betting on lower prices than those betting on a rising market, with 1,263 more bets in the bear camp than the bull camp as of Tuesday, according to Commodity Futures Trading Commission data.
These last three weeks are the first time since June 2012 that most investors are expecting the market to fall. Rising production in West Africa has been blamed for the futures slump.
Mr. Mooses said his producer and merchant clients have been reticent to take the short side of the market and instead have been looking to buy cheaper call options. WIth the vast majority of production in cocoa centered in West Africa, data can be spotty and opaque.
"No one has conviction to short this market," he said.
In other markets, orange juice futures ended the year as one of the best-performing commodities of 2016.
The tiny market for frozen concentrated orange juice futures, among the most thinly traded commodities, has soared 34% this yearbecause of diseased groves in Florida, home to the most oranges in U.S. juice.
Orange juice for March, the most actively traded, was up 1.8% Friday to end at $1.9385 a pound on the ICE Futures U.S. exchange.
Citrus greening disease, which causes fruit to drop before it is ripe, has decimated crops in Florida and forced the U.S. to push up imports of juice from Brazil, the largest producer of citrus for juice.
Imports have exceeded domestic juice in the concentrated market since the 2013-2014 season, according to data from the Florida Department of Citrus.
But Brazil, the go-to provider for the U.S., also struggled with its crop in 2016 because of drought that cut into yields.
Traders say they are expecting a recovery in 2017 that could be bearish for prices. This month, the U.S. Department of Agriculture released an attache report from Brazil that predicts a 37% increase to the orange crop in the Sao Paulo region of Brazil for the2016-17 season to 340 million boxes from 249 million boxes last year. Sao Paulo is the most crucial growing region for the orange juice market.
At the same time, consumer demand for juice has been on the decline.
Americans drank 5.3% less juice year-over-year in 2016, according to Nielsen data, setting a new low of 464 million gallons in data going back to 2002.
"Reductions in retail sales of orange juice are resulting from a number of angles, including perceptions that orange juice is not trendy," said Judith Ganes Chase, president of commodities research firm J. Ganes Consulting LLC of New York, "that it is loaded with sugar and therefore should be banned from diets and that there are a wide range of other healthful beverage choices that are being touted as containing super foods, making them to appear as a more nutritious choice."
Arabica coffee for March was up 1.2% Friday at $1.3705 a pound, to end the year up 8.2%. Cotton forMarch was up 0.2% to end the year at 70.65 cents a pound, for a 12% gain on the year and raw sugar futures jumped 0.1% to settle at 19.51 cents a pound, closing with a 28% rise for 2016.
Write to Julie Wernau at email@example.com
(END) Dow Jones Newswires
December 30, 2016 17:11 ET (22:11 GMT)
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