Coffee Price Gains as Equity Indexes Rise; Cocoa Futures Fall

By Shruti Date Singh

Oct. 17 (Bloomberg) -- Coffee prices climbed the most in almost four weeks in New York as U.S. equities headed for the first weekly gains in a month. Cocoa futures fell.

The Standard & Poor's 500 Index is heading for a 5.9 percent increase after plunging 18 percent last week. The declines in equities prompted investors to sell commodities to generate cash and to protect themselves from a slower economy that might cut demand for raw materials, including coffee. The Reuters/Jefferies CRB Index of 19 commodities gained as much as 3.1 percent today.

``The big thing that happened was stocks held their lows,'' said Jack Scoville, a vice president for Price Futures Group in Chicago. ``That's kind of allowed the selling pressure to ease. A broad range of commodities are putting in positive performances.''

Arabica coffee futures for December delivery rose 2.65 cents, or 2.3 percent, to $1.156 a pound on ICE Futures U.S. in New York. The gain is the biggest for a most-active contract since Sept. 22.

On Oct. 8, coffee dropped to the lowest price since July 2007 as investors reduced stakes in commodities amid falling liquidity and a slowing economy.

In London, robusta coffee futures for January delivery rose $33, or 1.9 percent, to $1,794 a metric ton on the Liffe exchange.

Cocoa Market

Cocoa futures for December delivery fell $2 to $2,122 a metric ton in New York. The price yesterday reached $2,093, the lowest for a most-active contract since Jan. 22.

Cocoa may approach $2,000 if equities slide again and on concern a slowing economy may reduce demand, said Hector Galvan, a trading consultant for RJO Futures in Chicago.

Prices may slump amid ``a potentially weaker demand outlook for chocolate, which is generally viewed as a luxury item,'' Standard Chartered Bank said in a report on Oct. 9. Cocoa will average $2,438 a ton in New York next year, down from a projected average of $2,567 in 2008, the bank said.

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