Cocoa Price Drops to 11-Month Low as Dollar Rises; Coffee Falls

By Shruti Date Singh

Oct. 22 (Bloomberg) -- Cocoa futures fell to the lowest in almost 11 months as the U.S. Dollar Index surged, making commodities more expensive for buyers holding other currencies. Coffee declined.

The index, which values the dollar against six currencies, rose for a third straight day, gaining as much as 2.3 percent and reaching the highest level since November 2006. Among the currencies in the index is the U.K. pound, which is used to trade cocoa in London. A stronger dollar reduces the appeal of commodities as a hedge against inflation for investors.

``Seeing the dollar up, it's going to be difficult for cocoa to go up,'' said Adam Klopfenstein, a senior market strategist for Lind-Waldock in Chicago, a division of MF Global. ``You are seeing a lot of commodities pressured down.''

Cocoa futures for December delivery fell $41, or 2 percent, to $1,996 a metric ton on ICE Futures U.S. in New York. The price earlier reached $1,924, the lowest for a most-active contract since Nov. 28.

The Reuters/Jefferies CRB Index of 19 raw materials fell to the lowest level since August 2004.

Concerns that a slowing economy will reduce consumption of commodities may spur food companies to slow purchases, Klopfenstein said.

Arabica coffee futures for December delivery fell 1.65 cents, or 1.4 percent, to $1.126 a pound on ICE. That is the biggest percentage drop for a most-active contract since Oct. 15.

In London, robusta coffee for January delivery fell $25, or 1.4 percent, to $1,761 a metric ton on the Liffe exchange.

The slump in global equities continues to remind commodity traders of the slowdown in the economy, Klopfenstein said.

The Standard & Poor's 500 Index fell for the third time in four sessions today, declining as much as 5.4 percent. The gauge was down 18 percent this month through yesterday.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.