Coffee and Cocoa Slump With Consumption Dropoff After Russia Attack

(Bloomberg) -- Cocoa and coffee slumped in New York following the Russian invasion of Ukraine, with the crisis expected to hurt the global economy and curb consumption of goods like chocolate and lattes at restaurants and cafes.

Demand for chocolate, for which cocoa is the main ingredient, and coffee are still recovering from the pandemic. Much of candy sales take place at airports, which suffered from travel restrictions, and a significant portion of world coffee consumption occurs at restaurants and cafes, which do well when economies are thriving. Analysts at Oxford Economics including Tatiana Orlova lowered its baseline for Russian gross domestic product by 1.2% by 2023, and for European economies by half that amount. 

“Coffee and chocolate demand may suffer more from the crisis,” said Michael McDougall, managing director of Paragon Global Markets.

Arabica coffee for May delivery fell 2.5% to $2.4125 a pound, snapping a two-session rally. Cocoa futures tumbed 3% to $2,585 a ton in New York.

Sugar fluctuated between gains and losses. Elevated energy costs can encourage mills in Brazil, the top sugar producer, to dedicate more cane juice toward making more ethanol and less sweetener. Still, the Brazilian real tanked after the crisis triggered a sell-off, boosting incentives for the nation’s producers to sell commodities priced in the dollars, which means more supply could reach global markets.

European farmers could plant less sugar beets as prices skyrocket for crops like wheat, barley, rye and oats, for which Russia and Ukraine are key suppliers, McDougall said. 

Brent jumped more than 9% topping $105 a barrel for the first time since 2014 after President Vladimir Putin ordered Russian troops into Ukraine. Kyiv called it a “full-scale invasion” and announced martial law, while U.S. President Joe Biden said he would impose “severe sanctions” on Moscow.

Cotton also slid, erasing earlier gains. The U.S. Department of Agriculture projects world consumption will reach another record for the season starting in August. The crop in the U.S., the top exporter, will increase as acreage expands sharply. 

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