Cocoa Falls as U.S. Budget Deadlock to Erode Demand; Sugar Drops

Cocoa futures fell to the lowest in almost five months on concern that an impasse in U.S. budget talks will erode demand for riskier assets such as commodities. Sugar and orange juice also dropped. Coffee and cotton rose.

Senator Joseph Lieberman said yesterday that time is running out for U.S. lawmakers to agree on a budget deal to avoid more than $600 billion in automatic tax increases and spending cuts known as the fiscal cliff. The Standard & Poor’s 500 Index slumped for a second session, while the S&P GSCI Spot Index of 24 raw materials declined to the lowest in a week.

“Without a resolution in the fiscal cliff, we could see the U.S. fall back into recession, and that could cause a net withdrawal of investor capital,” Michael McDougall, a senior vice president at Newedge Group in New York, said today in a report.

Cocoa for March delivery retreated 1.7 percent to settle at $2,273 a metric ton at 1 p.m. on ICE Futures U.S. in New York, after touching $2,270, the lowest for a most-active contract since July 26. Prices have dropped for six straight sessions, the longest slump since early April, paring this year’s gain to 7.8 percent.

Raw-sugar futures for March delivery slid 1.2 percent to 19.02 cents a pound in New York. The commodity has lost 18 percent this year amid increasing output in Brazil, the world’s largest producer. Orange-juice futures for March delivery slumped 0.6 percent to $1.334 a pound in New York.

Arabica-coffee futures for March delivery added 0.3 percent to $1.47 a pound on ICE. Cotton futures for March delivery rose 0.3 percent to 76.4 cents a pound.

On NSYE Liffe in London, white-sugar futures for March delivery fell 0.3 percent to $516.50 a ton. Cocoa futures for March delivery dropped 0.6 percent to 1,460 pounds ($2,354) a ton, and robusta coffee for March delivery rose 0.6 percent to $1,906 a ton.

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

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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