Cocoa Drops in London on Speculation Ivory Coast Supply to Rise

By Marianne Stigset and Pauline Bax

Sept. 3 (Bloomberg) -- Cocoa fell for a third day in London on speculation supply will increase from Ivory Coast, the world's biggest producer, and as crude oil led other commodities lower.

Bean arrivals at the ports of the West African nation, which accounts for almost 40 percent of global supply, gained 9 percent in the first eight months of the year, Reuters reported this week, citing estimates from unidentified exporters. Sliding oil prices and a stronger dollar curbed the appeal of raw materials from gold to wheat as a hedge against inflation.

Cocoa is falling on ``continued selling across the board of commodities, particularly softs, a weakening in oil values plus indications of upcoming plentiful supplies from the main Ivory Coast crop resulting from heavy rains,'' Ryan Bennett, a trader of the beans at Sucden (U.K.) Ltd., wrote in a report today.

Futures for December delivery fell 10 pounds, or 0.7 percent, to 1,536 pounds ($2,746) a metric ton as of noon on the Liffe exchange in London. The beans have gained 48 percent this year, outperforming the 9.9 percent advance in the UBS Bloomberg CMCI Index of 26 commodities.

Cocoa futures for December slid $24, or 0.9 percent, to $2,640 a ton in after-hours trading on ICE Futures U.S.

Commodities are trading near their lowest in five months, led by oil, on concern slowing global economic growth will crimp demand. The Standard & Poor's GSCI gauge of raw materials yesterday slumped the most since March 19.

Ospraie Management LLC, once the largest commodity hedge fund firm, said yesterday it would close its biggest fund after losing 38.6 percent this year on bad bets on commodity stocks.

Lack of Sun

Cocoa may be supported by prospects for a reduced crop next season. Ivory Coast may harvest a smaller crop because a lack of sunshine has led to black-pod disease outbreaks, Angoua Edoukou, interim president of the Bourse du Café et du Cacao, said by phone from the commercial capital, Abidjan.

Signs of the disease are showing in growing regions including the southwestern zone of Soubre, the central area of Daloa and the border with neighboring Ghana.

Ivorian growers collect a larger main crop from October to March, while a smaller mid-crop is harvested from April to September. Last season's main crop totaled 1.07 million tons, according to BCC statistics.

The 2008-2009 main crop may not surpass 1 million tons because of black-pod rot, said a crop analyst who declined to be named because the estimate isn't public. The analyst recently completed a trip through Ivory Coast inspecting plantations.

The International Cocoa Organization forecasts an 88,000-ton supply shortfall this season, the second annual deficit.

``Periodic scattered thunderstorm activity through key cocoa areas of Ghana and Ivory Coast will maintain soil moisture for cocoa trees and development of the main crop,'' forecaster Meteorlogix LLC said yesterday in a report. ``However, it may also promote pod rot.''

Among other agricultural commodities, robusta for November delivery fell $27, or 1.2 percent, to $2,226 a ton in London. White sugar for October delivery dropped $3.50, or 0.9 percent, to $394 a ton.

-- Editors: Tony Barrett

To contact the reporters on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net; Pauline Bax in Abidjan via Johannesburg at pmrichardson@bloomberg.net.