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Cocoa ETNs Sweeten on Shrinking Supply


Cocoa exchange traded notes are looking sweet as traders push cocoa futures to a two-week high on crop damaging weather conditions.

The iPath DJ-UBS Cocoa TR Sub-Index ETN (NIB) jumped 3.2% Tuesday while the iPath Pure Beta Cocoa ETN (CHOC) surged 3.6%. Year-to-date, NIB is up 17% and CHOC increased 16.2%. [Speculators Run Up Cocoa Prices, ETN]

Indonesia, the third largest-largest producer of cocoa, could see exports drop 14% year-over-year for 2013, reports Michael Taylor for The Jakarta Globe.

“Heavy rains in Indonesia have hurt the cocoa crop — there are many black pods and instances of the cocoa pod borer disease,” Zulhefi Sikumbang, chairman at the Indonesian Cocoa Association, said in the article.

ICE cocoa futures were up 3.1% Tuesday, trading around $2,736 per metric ton.

The latest out of Indonesia “opens the door to go test $2,800 again,” Hector Galvan, senior broker at RJO Futures, said in a Wall Street Journal article.

Cocoa prices have increased 26% since August due as traders speculating on dry weather during the main development period of West African crops, which could hurt the quantity and quality of the beans. About 70% of the world’s cocoa comes from this region.

The CHOC and NIB ETNs track different cocoa contracts. During the futures “roll” period, CHOC’s index “may be comprised of two futures contracts” instead of just a single contract. NIB only uses one futures contract in its methodology. [ETF Chart of the Day: Tastes Like Chocolate]

iPath DJ-UBS Cocoa TR Sub-Index ETN

For more information on cocoa, visit our cocoa category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.