Cocoa Drops to Near Eight-Month Low in Widespread Markets Selloff

By Julie Wernau Features Dow Jones Newswires

Cocoa futures dropped sharply Friday amid a widespread selloff that hit markets from U.S. stocks to bitcoin.

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Cocoa for March fell 5.1% to end at $1,809 a ton on the ICE Futures U.S. exchange, the worst close for the most actively traded cocoa contract since May 3.

Adam Sarhan, chief executive of 50 Park Investments, said commodities have broken their correlation with the dollar this week. The Wall Street Journal dollar dropped this week against a basket of currencies. Typically, because commodities are sold in dollars, the two usually have an inverse correlation as demand for commodities picks up when other countries gain more buying power.

"You rarely see these big big selloffs in these markets all at the same time," Mr. Sarhan said. "You've got broad-based selling across nearly every asset class."

Headed into year-end, Mr. Sarhan said, markets are pulling back as money managers take profits. In the case of the soft commodities--which, except for cotton, have sat out the rallies seen in other asset classes-- there have been no major weather events and little impetus to buy; so, traders are getting out.

Favorable weather, strong farm gate prices in Ghana and sluggish demand growth are expected to add up to more cocoa supply than demand again this year, according to commodities broker JSG Commodities.

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The firm said it anticipates cocoa supply in the 2017/2018 crop year to outstrip demand by 88,450 tons following a surplus of 347,600 tons the year before and expects prices to trade within a range until new fundamental developments occur. The firm places total production for the year at 4.655 million tons, with cocoa bean processing at 4.52 million tons.

In other markets, raw sugar for March fell 1.2% to end at 14.60 cents a pound, March arabica coffee clipped 1.5% to end at $1.204 a pound, frozen concentrated orange juice for March lost 0.4% to settle at $1.359 a pound and March cotton lost 0.1% to end at 77.87 cents a pound.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

December 22, 2017 15:08 ET (20:08 GMT)