DJ ICE Cocoa Review: Falls On Dollar Strength, Crop Ideas
DOW JONES NEWSWIRES


Cocoa futures for September delivery fell to an 11 1/2-week low on
speculative fund sales linked to a strong U.S. dollar and ideas that favorable
conditions in West Africa will lead to increased production.

Nearby September cocoa lost $106, or 3.5% Tuesday to settle at $2,906 a ton
on ICE Futures U.S. in New York. The session low of $2,880 was the weakest
price for the contract since May 21.

While West African cocoa production has fallen in recent years due to a lack
of investment in the sector, poor yields and the relative popularity of
alternative crops such as rubber trees, favorable weather conditions are seen
boosting the upcoming main crop in top-producer Ivory Coast.

"Over the last three or four weeks we have seen very favorable weather for
cocoa development," said Sterling Smith, analyst at Country Hedging in St.
Paul, Minn.

"It was a little moist earlier and I think that may have gotten people a bit
nervous, but it dried right back out and things are as they should be," he
added.

Cocoa needs moisture interspersed with days of bright sunshine to allow the
pods to dry properly and thus stave off disease.

Cocoa futures were also pressured by the strengthening dollar. Traders fled
for the safety of the greenback amid reports indicating slowing domestic
consumption in China, a surprising drop in U.S. productivity and trepidation
over what measures, if any, the Federal Reserve might take to help boost the
slumping economy.

The economic worries encouraged traders to shed riskier commodity investments
like cocoa and buy the dollar in a safe-haven play, a broker said.

Arrivals of cocoa beans to Ivory Coast ports from the farms from Oct. 1
through Aug. 8, the first 45 weeks of the 2009-10 season, were projected at 1.1
million metric tons, down 0.8% from the comparable year-ago level.

In the week through Aug. 8, arrivals were estimated at 10,000 tons, up from
5,153 tons one year ago.

Cocoa is in a seasonal lull as the Ivory Coast won't begin harvesting its
much larger main crop until October and before global demand typically
strengthens in the fall due to the approaching holidays.

Ivory Coast Prime Minister Guillaume Soro has announced that presidential
elections will be held on Oct. 31. Elections originally scheduled in 2005 were
repeatedly canceled by an ongoing civil war between the rebel-controlled north
and the government-run south. Allegations of voter fraud have also repeatedly
delayed the process.

While the elections could foster a more stable political climate in the
war-torn nation, most cocoa traders are taking a wait-and-see attitude. Any
political upheaval or violence this fall could potentially hurt cocoa exports
out of Ivory Coast, a situation traders will monitor closely, the broker said.

London cocoa futures also fell on the prospect of larger crops and the losses
in New York. September cocoa traded on NYSE Euronext's Liffe lost GBP62, or
2.8%, to settle at GBP2,123 a ton.

Open interest in ICE cocoa fell 994 to total 122,445 contracts, the exchange
reported.

Volume is pegged at 35,370 contracts, with 1,045 calls and 157 put options
traded.

ICE Change Range
Sep $2,906 dn 106 2,880 - 2,989
Dec $2,930 dn 109 2,907 - 3,014
* ICE settlements in dollars per metric ton with intraday range.