Cocoa, Coffee Decline as Sluggish U.S. Economy May Cut Commodity Demand

Cocoa prices fell, capping the biggest weekly drop since mid-May, on concerns that commodity demand will slacken amid a fragile economic recovery in the U.S. Coffee also slumped.

Private employers added fewer workers to payrolls in June than forecast, a government report today showed. The report follows data indicating weakness in the housing market and sluggish manufacturing. Cocoa dropped 4.6 percent this week and is down 9.7 percent in 2010.

“I suspect that the recent slowdown in the U.S. is weighing more on the markets than perceived,” said Dennis Cajigas, a senior market strategist at brokerage MF Global Holdings Ltd. in Chicago.

Cocoa for September delivery fell $70, or 2.3 percent, to $2,971 a metric ton on ICE Futures U.S. in New York.

Arabica-coffee futures for September delivery dropped 3.95 cents, or 2.3 percent, to $1.643 a pound on ICE Futures U.S. in New York. The price declined 2.7 percent this week.

“With the economic news lately, people aren’t buying commodities,” said Jack Scoville, a vice president at Price Futures Group Inc., a broker in Chicago.

The Reuters/Jefferies CRB Index of 19 commodities fell for the second straight day and has lost 10 percent this year.