African Rains Dampen Cocoa Prices

Cocoa prices were dipping nearly 2.5% Tuesday on news of wet weather in the main growing region as well as ongoing concerns over reduced demand.

Contracts for July delivery of the beans were losing $44, to $1,844 a ton, on the New York Board of Trade.

"There is some concern about increased rainfall in West Africa, as it's beneficial for the main crop in 2007 and 2008," explains Rohit Savant, a commodities analyst at the specialty consulting firm CPM Group in New York.

Favorable weather conditions in Ghana and Ivory Coast, the two largest producing countries in the region, will likely lead to increased supply and so put more downward pressure on prices.

Also continuing to weigh on the minds of traders was news released Friday from the Chocolate Manufacturers Association that first-quarter U.S. cocoa grind figures were down almost 7% when compared with the same period a year ago. Savant says it's reflective of a drop in demand for beans. Other indicators such as volume of cocoa butter and chocolate liquor (melted) were off also.

Shares of confectioners Hershey(HSY Quote - Cramer on HSY - Stock Picks) and Cadbury Schweppes(CSG Quote - Cramer on CSG - Stock Picks) were lower by 0.4% and 1% respectively in recent trading.

Turning to the base metals, copper contracts were losing 6 cents at $3.59 a pound on the Comex division of the New York Mercantile Exchange on news that the sales of existing homes fell much more than expected in March. Copper is used for electrical wiring in the construction of new dwellings, an important piece of the global demand equation for copper. For that reason, traders play close attention to the overall health of the housing sector.

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