Trick or treat? Some see post-halloween rally for chocolate

Chocolates are cheaper for Halloween, but prices likely will rebound by Christmas thanks to rising demand for cocoa beans.

A global surplus sent cocoa prices plunging for most of the past two years, which helped to temper retail chocolate costs. There are signs that the overhang is beginning to ebb as consumers eat away the excess. Grindings, a measure of demand, have been climbing globally. That’s caught the attention of hedge funds, who are finally starting to back away from bets that the commodity’s slump will continue.

“Low prices are the cure for low prices,” said Harish Sundaresh, a

portfolio manager and commodities analyst in Boston for the Loomis Sayles Alpha Strategies team, which oversees $5 billion. “A combination of improving grinding demand from chocolatiers ahead of the holiday season, overcrowded short positioning and persistently low prices over the past year has improved the price outlook.”

Cocoa futures traded in New York have erased 2017’s losses. Prices were down as much as 17 percent in May, but cocoa is up 0.7 percent for the year.

Hedge funds held a net-short position, or the difference between bets on a price increase and wagers on a decline, of 18,446 futures and options in the week ended Oct.

17, according to U.S. Commodity Futures Trading Commission data released Friday. That compares with 21,560 a week earlier and was a sixth straight contraction.

Holiday demand

Luckily for Halloween revelers, who will celebrate Oct. 31, the rebound hasn’t started in full yet. In the four-week period ended Oct. 8, average retail unit prices for chocolate were down 7.3 percent from the prior period, according to data from Chicago-based researcher IRI compiled by Bloomberg Intelligence.

The U.S. holiday is a candy bonanza. Americans will dole out

$2.7 billion on the treats, as total spending on Halloween climbs 8.3 percent to $9.1 billion, the National Retail Federation estimates. About 75 percent of households hand out sweets to trick-or-treaters, and chocolate comes in as the clear favorite, according to the National Confectioners Association.