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Cocoa Rises to Highest in at Least 21 Years in London on Supply

April 27 (Bloomberg)

Cocoa advanced to the highest price in at least 21 years in London on speculation that supply will trail demand as chocolate manufacturers and retailers restock.

World output will lag behind use in the 2009-10 season and lead to a 124,000 metric-ton deficit, Fortis Bank Nederland NV and VM Group said last week. Grindings, an indication of demand, will advance 3.3 percent from a year earlier, they said.

"Consumer demand looks solid," Tobin Gorey, a London- based analyst at JPMorgan Chase & Co., wrote in a report. "The cocoa market continues to climb on better news about demand."

Cocoa for May delivery climbed $16, or 0.7 percent, to close at 2,344 pounds ($3,581) a ton on the Liffe exchange. That is the highest closing price since at least January 1989, according to data on Bloomberg.

Cocoa for July delivery dropped $24, or 0.7 percent, to $3,204 a ton on ICE Futures U.S. in New York. It earlier reached $3,242, the highest level since Jan. 29.

Prices of the chocolate ingredient have jumped 10 percent since mid-April in London on reports of increased grindings in the first quarter in Europe, the U.S. and Brazil.

While cocoa output in the Ivory Coast, the world's biggest grower, will be 1.26 million tons in 2009-10 compared with 1.22 million tons a year earlier, this will not be sufficient to meet the higher grindings forecast for this season, Macquarie Group Ltd. estimates.

Prospects for the mid-crop in the Ivory Coast are "quite good," according to Fortis and VM Group. The mid-crop, collected from April through September, will be 275,000 tons, bringing annual output to 1.175 million tons in the West African nation, they forecast.

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