Cocoa, Coffee Drop on Signs Debt Crisis to Cut Commodity Demand

By Elizabeth Campbell
Bloomberg

May 19, 2010

Cocoa fell for the first time this week on signs that Europe’s debt crisis may spread and reduce investor demand for commodities. Coffee also dropped.

Commodity prices declined to a 10-month low after Germany’s ban on some speculative financial sales raised concerns that debts in Europe will brake economic growth and lower demand for raw materials. The Standard & Poor’s GSCI Index of 24 items fell for the fifth straight session and earlier reached the lowest level since July 17.

“Basically, outside elements are putting pressure across the board on all commodities,” said Phil Streible, a senior market strategist at Lind-Waldock, a broker in Chicago. “It just seems like risk is being taken off the table.”

Cocoa for July delivery fell $12, or 0.4 percent, to $2,837 a metric ton at 11:47 a.m. on ICE Futures U.S. in New York. Before today, the chocolate ingredient declined 13 percent this year.

Cocoa hasn’t fallen further “because the British pound is holding some strength,” Streible said.

The pound, which is used to trade cocoa in London, rose, heading for the first gain in six sessions against the dollar. A stronger pound increases the appeal of supplies in New York.

In another ICE market, arabica-coffee futures for July delivery dropped 1.65 cents, or 1.2 percent, to $1.326 a pound. Before today, the commodity fell 1.3 percent this year.

On London’s Liffe exchange, cocoa futures for July delivery rose 10 pounds, or 0.4 percent, to 2,271 pounds ($3,258) a ton. Robusta-coffee futures for July delivery declined $29, or 2.1 percent, to $1,340 a ton.

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Editors: Michael Arndt, Daniel Enoch.
To contact the reporter on this story: Elizabeth Campbell in New York at ecampbell14@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.