Cocoa rose to its highest price in at least two decades in London on speculation that production will fall in Ivory Coast, the largest grower, and demand for chocolate will climb as the global economy rebounds.

Ivory Coast’s output will drop 12 percent to 1.2 million metric tons this year, the lowest level in 10 seasons, the International Cocoa Organization said last month. According to Gilbert Anoh N’Guessan, head of the nation’s cocoa industry group, production next season may fall to less than 1 million tons. Global supply in the year ending this month will trail demand for a third year, the ICCO estimates.

Cocoa grindings, a gauge of demand, are likely to increase by 1.5 percent to 2 percent next year, Jan Vingerhoets, executive director of the London-based ICCO, said Sept. 16.

“There’s overall positive noise because of low production plus higher demand,” Eugen Weinberg, an analyst with Commerzbank AG in Frankfurt, said by phone today. “Higher prices always attract lot of interest” from speculators, he said.

Cocoa for December delivery advanced as much as 28 pounds, or 1.4 percent, to 2,063 pounds ($3,391) a ton on the Liffe exchange, the highest intraday price since at least January 1989. The contract traded at 2,058 pounds a ton at 2:25 p.m. local time. The beans gained 16 percent this year, extending last year’s 71 percent advance.

Net Long Positions

Cocoa futures for December delivery rose $36, or 1.1 percent, to $3,206 a ton on ICE Futures U.S. in New York, adding to yesterday’s 3.1 percent jump.

Futures prices have rallied as hedge-fund managers and other large speculators increased their net long position in New York cocoa futures, or bets on price gains, in the week ended Sept. 15, according to U.S. Commodity Futures Commission data. Net long positions outnumbered short positions by 27,544 contracts, the highest since July 2008.

Global production will drop 7 percent to 3.5 million tons in the year ending this month, the ICCO said last month. Grindings for the period will shrink by 6.7 percent, hurt by the worst global recession since World War II, the ICCO estimates.

Ghana, the world’s largest producer after the Ivory Coast, will miss its target of producing 1 million tons a year by the 2010-11 season, Tony Fofie, chief executive of the Ghana Cocoa Board, said in a Sept. 7 interview. The state-run industry overseer expects the West African country to meet the goal by the 2012-13 season.

Pod Disease

The threat of the spread of black-pod disease and swollen- shoot virus has weighed on production and prices. Ivory Coast and Ghana account for more than 55 percent of total output.

In Cameroon, the world’s fifth-largest grower, the country’s two grinders missed a processing target for this season, the National Cocoa and Coffee Board said last week. The amount ground by the factories represents 12 percent of total production.

Prices have also climbed in the past year on speculation that an El Nino weather pattern would cut output in West Africa and Indonesia, the third-biggest producer. The phenomenon is marked by warmer-than-normal surface-water temperatures in parts of the Pacific, which in turn affect global weather patterns.

Among other agricultural commodities traded on Liffe, white, or refined, sugar for December delivery fell 2.1 percent to $567.20 a ton. That’s the biggest intraday percentage drop since Sept. 7.

Robusta coffee for November delivery slid $11, or 0.7 percent, to $1,472 a ton.