2014.09.2903:49:07UTC+00Hedge funds make bullish bets on cocoa behind Ebola

Bullish cocoa bets made by hedge funds increased right before prices increased to the highest since 201 behind concerns over a potential disruption in supply brought on by the Ebola epidemic in West Africa, the source for 70% of global supply.

Net long positions by money managers rose by the largest number in 16 weeks just as international organizations are struggling to contain the virus from spreading further to the neighboring country of Ivory Coast, the largest producer of cocoa in the world. Bullish positions increased by 6.4%, the most sizeable gain since June 3rd, to 65,761 contracts on futures and options as of September 23rd, data from the US Commodity Futures Trading Commission shows.

Cocoa rose to a price per metric ton of $3,311 last week behind a 1.6% gain in New York’s ICE Futures US right after it reached its highest since March 2011 of $3,399 on September 25th. The commodity has improved by 2.5% so far this month as of September 26th and is headed for its sixth consecutive gaining month to mark its longest winning streak in 12 years.

A report last week from Moody’s Investors Service says that the measures put in place to control Ebola could also end up causing shortages in labor and disrupting deliveries in October, the start of the commodity’s harvest season.

Analyst Damien Courvalin from Goldman Sachs Group Inc. says that,  “While you have a surplus this year because the weather is decent, demand is picking up, and you can see that long-term shortage looming. Recently, most of that rally is driven by the risk of Ebola.”

Supplies of cocoa inventories monitored by the ICE Futures US are currently at the lowest level since February, but are still 14% greater than where they were at the start of the year.