Prices for cocoa, the bean used to produce chocolate, have risen sharply on the back of a disappointing crop in the Ivory Coast, the world's largest producer with 40 per cent of global output. In addition, the chocolate market is showing signs of recovering in line with the global economy, adding to the tightness in the market.

Some in the industry fear that demand will outstrip supply for a fifth successive year in the 2010-11 season, something that has never previously happened.

Eoin Treacy's view UK traded cocoa continues to extend its two and a half year uptrend and has an increasing backwardation. It ranged for much of the last six months in an orderly mean reversion and broke upwards to new highs this week. A downward dynamic would be required to check momentum beyond a brief pause while a sustained move below £2200 would be needed to question the broad consistency of the advance break by taking out the progression of major reaction lows and the 200-day MA.

The US traded contract has been less consistent and is trading in contango. The difference between the two contracts is not purely a currency differential and may reflect the dominance of West African cocoa in the London market against South East Asia supply in New York. (Also see this article on Wikipedia) The US contract found support in the region of the February lows three weeks ago and continues to rally from that area. A sustained move below $2750 would be required to question scope for some further upside.