Speculators have been jumping into cocoa even while slashing exposure to other crops, amid growing evidence that demand for the bean may end the year more robust than had been expected.

The investors who have continued to cut bets on price rises in most crops, according to latest US regulatory data, have turned positive on cocoa futures for the first time since August.

Analysis of futures position statistics released late on Monday by the US Commodity Futures Trading Commission showed speculators turning from being net short of some 7,000 New York cocoa contracts to net long of 2,000 in a week, Australia & New Zealand Bank said.

"Cocoa saw a huge turnaround," the bank said, while flagging speculators' reduced bets on rising prices of corn, sugar and soyoil, as well as cotton, where net length tumbled by 15.4% over the week.

ANZ uses a broader definition of speculator than many other analysts, including both the CFTC's "other" and "non-reportable positions" segments alongside the core "managed money" criterion.

Rabobank termed the covering in short positions the most dramatic for cocoa in two years.

Consumption surprise? 

The comments came as VM Group analysts highlighted that the huge increase in short bets by non-commercial investors, including speculators, between August and earlier in November had fostered a relatively small drop in prices, of 4%.

This resilience suggested that "commercial buyers have picked up their rate of buying as the price has dipped".

 Indeed, with Brazil's cocoa grind soaring by 5.2% between September and October to the highest figure in 19 years, there was the potential for demand to outpace industry expectations.

"The grind figure for the final quarter of 2010 could surprise to the upside," said VM, which undertakes research for ABN Amro.

"We had been expecting little if any growth, but the figure from Brazil for October might be a straw in the wind."

To the polls

However, the cocoa market is also likely to react to the result of presidential elections in Ivory Coast, the world's top producer of the chocolate ingredient,

Tensions ahead of today's poll prompted cocoa exporters to shut up shop, with tensions running high between supporters of the incumbent president, Laurent Gbagbo, and his challenger Alassane Ouattara.

A peaceful vote could, in the short-term, see speculators increase short bets, on expectations of smooth cocoa supplies and therefore lower prices, VM added.

Whatever the outcome, bears should "make hay while the sun shines", with cocoa farmers likely to be tempted by rising palm oil and rubber futures to switch crops, so limiting the bean's production prospects, and potentially lifting its price too.

Cocoa for March ended 2.0% higher at £1,904 a tonne in London, and up 1.9% at $2,772 a tonne in New York.