Cocoa Falls on Slack Commodity Demand Before U.S. Bailout Vote

By Yi Tian

Oct. 1 (Bloomberg) -- Cocoa fell on slack demand before the U.S. Congressional vote on a $700 billion financial-rescue plan.

The Senate set a vote for tonight on the bill, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support. On Sept. 29, the Reuters/Jefferies CRB Index of 19 raw materials plunged by the most ever as lawmakers rejected the proposal. Cocoa had the biggest drop in almost a month on that day.

``We're in a situation where you don't know what's going to happen,'' said Michael Ragazzo, the president of MBL Commodities Ltd. in New York. ``Everything is tied in at this point.''

Cocoa futures for December delivery dropped $47, or 1.8 percent, to $2,511 a metric ton on ICE Futures U.S. in New York. In the third quarter, the price tumbled 20 percent, the most since the three months ended March 31, 1992.

The dollar's climb against the pound and other currencies also weighed on cocoa, analysts said. Cocoa is traded in pounds in the U.K. and West Africa, the world's biggest exporter of the chocolate ingredient. Prices of other so-called soft commodities such as sugar, coffee, cotton and orange juice have declined this week.

``Market-moving news continued to be not cocoa- or even softs-related,'' Stephanie Garner, a trader at Sucden (U.K.) Ltd. in London, said in a report. Currency swings reflect ``the ever-depleting confidence in both the euro and the pound as the credit crisis extends to European financial firms,'' Garner said.

This week, the dollar has climbed 3.3 percent against a basket of six major currencies. That has eroded the appeal of raw materials traded in the U.S. currency for overseas buyers.

On Sept. 15, cocoa touched $2,496, the lowest in six months. Should that level be breached, the price may slide as low as $2,445, Ragazzo said.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.