Cocoa Heads for Biggest Weekly Gain in 7 Years on Pound’s Drop

By M. Shankar

Jan. 23 (Bloomberg) -- Cocoa headed for its biggest weekly gain in more than seven years in London as the U.K. pound slumped and on speculation a supply deficit will push up prices.

Sterling sank to a 23-year low versus the dollar and headed for its biggest weekly drop since at least 1992 after a report showed the U.K. economy shrank more than forecast in the fourth quarter. Declines by the pound reduce the cost of buying London- traded cocoa for holders of other currencies. The United Nations said yesterday an infestation of caterpillars in northern Liberia may spread to Ivory Coast, the world’s biggest cocoa grower.

“The currency is affecting the London market,” Laurent Pipitone, a senior statistician at the International Cocoa Organization in the U.K. capital, said today. “The past two years we have had a supply deficit, and it is clear we will have a deficit this year.”

Cocoa for March delivery rose 35 pounds, or 1.8 percent, to 2,004 pounds ($2,746) a metric ton on the Liffe exchange by 2:32 p.m. in London. The beans have climbed 13.5 percent this week and will post the biggest gain since November 2001 should they close at that level today. Cocoa is the only commodity on the UBS Bloomberg CMCI index to have risen in the past 12 months.

Exports from Ivory Coast in December fell 14 percent from a year earlier, data from the ports of Abidjan and San Pedro show.

Output in Ivory Coast, the source of about 40 percent of global supply, has been hurt by bad weather, low prices that spurred farmers to hoard beans, and a lack of credit to fund trade, according to Brussels-based Fortis.

Deficit Forecast

Global production of the chocolate ingredient will fall short of demand by 45,000 tons in the 2008-09 season, Fortis said last month, switching from its forecast for a surplus.

Cocoa for March delivery rose $41, or 1.6 percent, to $2,621 a ton on ICE Futures U.S. in New York. Robusta coffee for March delivery fell $1, or 0.1 percent, to $1,707 a ton on Liffe, and white sugar gained $7.20, or 2.1 percent, to $352.50 a ton.

India, the biggest consumer of sugar, may cut tax on raw- sugar imports to bolster local supplies and prevent domestic prices rising, a government official who didn’t want to be identified told reporters in New Delhi today.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net