Coffee, Cocoa Slide on Better Supply and Geopolitical Tensions

(Bloomberg) -- Coffee and cocoa futures dropped, extending last week’s losses amid a selloff in broader financial markets. 

March arabica futures slumped as much as 2.1% to $2.33 a pound, hitting a two-week low. An improved supply outlook has helped put the brakes on a rally in coffee, and the negative shift in global risk sentiment “may dampen near-term demand prospects,” Chicago-based Hightower Report said in a note.   

Rising geopolitical tensions between Ukraine and Russia “have led to a flight to safe havens such as the U.S. dollar, which inevitably is bearish commodities,” said Kona Haque, head of research at ED&F Man in an emailed statement.  

Equities and commodities declined as investors weighed Russia-linked geopolitical tensions and braced for the Federal Reserve’s meeting this week amid expectations of an aggressive tightening cycle. Moscow has denied plans to invade its neighbor.

Cocoa futures slumped 3.3% to settle at $2,493 a ton amid signs of improving deliveries to ports in Ivory Coast, the largest producer, and shipments out of Nigeria, another important exporter. At the same time, demand concerns are flaring up again.

Data last week showed a decline in bean grinding across North America, reviving worries that pandemic restrictions and disruptions will keep consumption subdued, curbing key chocolate sales at airport duty-free shops, and even hotels, where business conferences are still down.

The total number of flights from 865 airports tracked by FlightRadar24 worldwide rose 31% on Jan. 22 from the same day in 2021, but was still down 26% from the 2019 level. Meanwhile, the American Hotel & Lodging Association expects occupancy rates and room revenue to approach 2019 levels in 2022, though the outlook is less optimistic for ancillary revenue, including food and beverage. 

U.S. hotels lost almost $112 billion in room revenue combined during 2020 and 2021, the group said by email. While leisure travelers will continue to drive the recovery, the business segment -- which made up 53% of industry room revenue in 2019 -- will represent just 44% this year, it said.

In other soft commodities, raw sugar, cotton and orange juice also slid in New York.

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