(Bloomberg) -- London cocoa has gotten so cheap relative to New York futures that European traders have started to ship beans across the Atlantic.In an unusual move, some 3,000 metric tons of cocoa stored in exchange-licensed warehouses in Europe are being shipped to the U.S. to be delivered against New York futures, according to people familiar with the matter, who asked not to be identified because the deals are private. The beans were originally imported into Europe from Cameroon and are stored in bags, instead of 1,000-ton piles popular at the London bourse, they said.London futures have been trading at a discount to New York for most of the past three years, partly as traders brought large amounts of cocoa from Cameroon in 1,000-ton piles to be delivered against the contract. Since there aren’t many processors that can use so much of those beans, which produce a reddish powder, the London market has been undervalued.Traders handling the transactions are benefiting from the price gap between the two markets and could also gain an additional $80 a ton premium when the beans are eventually delivered against expired futures contracts in New York. In London, Cameroon cocoa doesn’t incur a premium. For now, traders are only sending cocoa that’s stored in bags, the people said. While a wider price gap could entice some to break the 1,000-ton piles into the smaller bags accepted in the New York market, ICE Futures U.S. says that type of deal wouldn’t be possible as the U.S. exchange only accepts cocoa in original shipping bags.Some test shipments arrived earlier this year as traders gauged whether the Cameroon beans that have been stored in Europe would be approved at grading rooms in New York, they said. Some 15,776 bags of cocoa from Cameroon have been graded in New York for delivery against December futures and another 3,999 bags are pending grading, data from ICE Futures U.S. showed.Still, there are challenges bringing large amounts of cocoa from Europe as U.S. customs require paperwork to prove where the cocoa came from originally. For now, the amount is too small to affect futures prices, but further deliveries could end up erasing the premium December futures in New York command over the next contract.(Updates with ICE comment in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
From the price of coffee to the national debt as a percentage of GDP, these 11 numbers provide a picture of a fast changing global economy.
The Commitments of Traders report covering positions held and changes made by money managers in the week to July 7. Appetite for risk during this U.S. holiday shortened week was firm with the Bloomberg Commodity Index rising by 2.4%. Broad-based buying lifted the net-long held across 24 commodity futures above one million lots for the first time since January.