Cocoa rose for a second day in New York, following the longest slump in at least 50 years, after Olam International Ltd. said output will trail consumption in the season started Oct. 1. Sugar advanced.

Cocoa production will be 100,000 metric tons less than consumption in 2011-12, with the crop in top global producer Ivory Coast falling to 1.35 million tons, down from over 1.75 million tons the previous season, Gerry Manley, managing director and global head for cocoa at the company, said by phone from London yesterday. Cocoa has fallen 9.9 percent in London and 14 percent in New York over the past month on speculation supplies would be better than initially estimated.

“Futures prices have been hit hard, with the sell-off over the last six weeks from European debt concerns rivaling the falls experienced immediately after the failure of Lehman in 2008,” Paul Deane, an economist at Australia & New Zealand Banking Group Ltd. wrote in a report e-mailed today. “Even with last night's bounce, prices are still hovering at levels more consistent with 2007 levels.”

Cocoa for March delivery advanced 0.6 percent to $2,193 a ton by 05:45 a.m. on ICE Futures U.S. in New York. The price rose as much as 8.7 percent yesterday. Prior to yesterday, it had fallen for 13 consecutive sessions, the longest slump since at least 1961. Cocoa for March delivery climbed 1.3 percent to 1,438 pounds ($2,240) a ton on NYSE Liffe in London.

Money managers reduced their net-short position, or bets on lower prices, in London cocoa by 55 percent in the week ended Dec. 6, data from NYSE Liffe, the derivatives arm of NYSE Euronext, show. Net-short positions fell to 2,695 from 5,995 futures a week earlier, according to the weekly commitments of traders report published on the exchange's website yesterday.

Eoin Treacy's view NYSE traded cocoa failed to sustain the break above 3500 in March, pulled back to test the lower side of the underlying range and broke downwards six weeks ago. It found at least near-term support yesterday in the region of 2000 which was also an area of support in 2008 and posted an impressive upside key day reversal. Prices followed through to the upside today and an unwind of the deeply oversold condition relative to the 200-day MA appears more likely than not.

LIFFE traded cocoa peaked in June 2010 and has been trending lower since. It is equally oversold relative to the 200-day MA and also posted a large upside key day reversal yesterday.

Against a background of weak cocoa and sugar prices, chocolate makers have performed reasonably well. Nestle is a European dividend aristocrat and yields 3.59% it broke downwards from a lengthy Type-3 top in August but rebounded impressively and has held above the psychological CHF50 since mid October. A sustained move below that level would be required to question medium-term scope for some additional upside.

Barry Callebaut has posted a progression of higher reaction lows since late 2008 and is currently testing the recovery highs near CHF860. A sustained move below CHF800 would be required to question potential for a successful upward break.

Lindt & Spruengli AG posted its largest reaction in more than two years in August but rebounded impressively. It needs to hold a move above CHF33,000 to reassert the medium-term uptrend.

Kraft yields 3.18% and remains in a relatively consistent uptrend. The $37 area has offered resistance on a number of occasions since 2004 but a sustained move below US$33 would be required to question current scope for a successful upward break.

Hershey has found support in the region of the 200-day MA on successive occasions since early 2010 and a sustained move below $50 would be required to question medium-term upside potential.