UPDATE 3-Huge physical cocoa delivery signals supply crunch

Fri Jul 16, 2010 1:41pm EDT

* Delivery represents almost all exchange stocks

* September premium to December widens

* ICCO urges more transparency on Liffe exchange

(Adds ICCO head's comments)

By Sarah McFarlane and Nigel Hunt

LONDON, July 16 (Reuters) - Nearly all the physical stocks of cocoa that back futures trading of the commodity in London were snapped up on Friday after the July contract expired, fuelling fears of a September supply crunch.

The delivery of 240,100 tonnes of cocoa was the largest in nearly 14 years and represented almost all the physical stocks registered with the Liffe exchange that stood at 246,810 tonnes as of Monday July 12.

It follows weeks when the open interest for the July contract -- the outstanding positions -- was very high, prompting some market participants to complain to the Liffe exchange about the extent of speculation in the market and the lack of transparency on who was doing what.

There had been talk that one player may take delivery of most of the cocoa from July's expiry, potentially limiting the amount available to tender against the September contract and helping to push prices past 32-year highs set this week.

"September is going to be a bit nervous going forward, looking at this delivery size," said a London-based trader. "There's not a great quantity (left) for September."

The Liffe delivery data released on Friday does not show details on the final buyer of the cocoa, just the names of brokers taking delivery on behalf of their clients.

NYSE Liffe NYX.N declined to comment on Friday on the delivery from the contract expiry.

The exchange said this week it was in constant dialogue with its clients. On its website it says that as a regulated market, NYSE Liffe Euronext operates a fair and orderly market.

ICCO PLEA

The International Cocoa Organisation (ICCO) urged for more transparency on the Liffe market following the large delivery.

"The problem is that in particular there is not enough information on the transactions in the market," Jan Vingerhoets, head of the ICCO told a news conference in Abidjan on Friday.

"We hope very much that the situation today, the day July contract expires will be an incentive for London to finally improve the transparency,"he added. [ID:nLDE66F1RT]

Futures business normally involves chiefly the buying and selling of promises to deliver a commodity and it is rare for market participants to take such a large physical delivery.

BNP Paribas Commodity Futures Ltd took delivery of 102,450 tonnes of cocoa, Newedge Group SA 77,650 tonnes and ABN AMRO Clearing NV 60,000 tonnes. Brokers do not disclose on whose behalf they are acting.

The September futures premium widened over December as the delivery was announced, almost reaching 200 pounds a tonne. This pattern of prices, known as a backwardation, implies expectations of supply tightness and reflected market jitters about the high delivery.

"September/December continues to be very strong. September is going to be a concern for players," a trader said.

Ten brokers delivered cocoa against July, the largest of which were Newedge Group SA (188,020 tonnes) and ABN AMRO Clearing NV (22,890 tonnes). <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graphic on past deliveries:

here

Take a look: [ID:nLDE66B1VS] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Michael Hogan in Hamburg; Tim Cocks in Abidjan; editing by Anthony Barker, Veronica Brown and Sue Thomas)