Cocoa falls below 100-day moving averages, sugar down

Saturday, 28 January 2012 04:13

NEW YORK/LONDON: Cocoa futures turned lower on Friday, falling below 100-day moving averages in London and New York after the US market had jumped to a 2-1/2-month high.

Sugar and coffee also fell after data showed the US economy grew by less than expected in the fourth quarter.

The US Commerce Department reported the economy grew at a 2.8 percent annual rate in the fourth quarter - its fastest in 1-1/2 years but more slowly than economists had expected. World stock markets fell on the news, while the euro held firm on hopes an imminent deal on Greece's debt could help avert a disorderly default.

Cocoa futures on ICE dropped more than 2 percent after reaching the highest levels since mid-November, hitting resistance at the 100-day moving average at $2,490 a tonne, basis March. The market could not sustain gains from a short-covering rally that boosted prices around 7 percent on Tuesday.

March cocoa on ICE dropped $46, or 1.9 percent, to settle at $2,406 a tonne. It peaked at $2,480, the highest for the front month since mid-November.

"It's been a very strong run. The market's up $500 in a very short period of time," a veteran cocoa dealer in New York said.

"It's been a lot of short-covering and new longs into the market. Producers haven't sold much."

The benchmark March contract has climbed $477, or 23 percent, in the past three weeks, during which there were two multi-day rallies.

"Cocoa did find some resistance at the 100-day moving average. London went right to it and fell back down," another dealer said.

Liffe March cocoa futures closed down 28 pounds, or 1.8 percent, at 1,563 pounds a tonne, after hitting their 100-day moving average at 1,603 pounds.

Dry and windy weather since November has dampened output prospects for the end of Ivory Coast's October-March main crop.

"In top producer Ivory Coast, concerns center on the potential impact of recent heavy winds, thus jeopardizing the previous bumper output prospects," Natixis said in a commodities note.

Cocoa butter ratios ticked higher in Asia this week as chocolate makers returned to the physical market after the Lunar New Year holidays, while expectations of rising demand ahead of Easter offered additional support.

SUGAR DIPS

Raw sugar futures posted the biggest fall in three weeks, after failing to break above technical resistance around 25 cents per lb.

The weak tone could be seen in news that Thai raw sugar premiums fell further this week as New York futures approached a two-month high and crushing picked up in Thailand, although interest increased when prices slackened.

"We are in a correction," said The Price Group analyst Jack Scoville, adding there seemed to be good support in the March contract at 24 cents.

March raw sugar futures on ICE dropped 0.52 cent, or 2.1 percent, to end at 24.21 cents a lb, their biggest one-day fall since Jan. 5. The contract rose to 25.21 cents on Tuesday, the highest for the front month since mid-November.

"We have so far tested resistance around 25 cents for the last five sessions in a row but have failed to close above the 'magical' number. Should we close above 25 cents tonight it might generate further upside short-covering momentum," said Thomas Kujawa of brokerage Sucden Financial.

"We remain concerned there are probably stops above 25 cents (perhaps 25.20/25 area) but a rally will provide a sell opportunity."

Speculators shifted to their biggest net long position in raw sugar futures and options in 11 weeks during the week ended Jan. 24, data from the US Commodity Futures Trading Commission showed post-market.

In US cocoa, speculators trimmed their net short position while they boosted their net short position in arabica coffee.

London March white sugar futures fell $10.70, or 1.7 percent, to settle at $637.70 per tonne.

Coffee prices declined as dealers eyed a slowdown in sales from Brazil, where exports were strong early in the season.

Brazil plans to start piecemeal sales of its 1.4 million 60-kg bags of 2009 arabica coffee stocks in February after having sold off almost all of its older stocks, agriculture ministry coffee director Edilson Alcantara said.

Arabica coffee prices on ICE eased with March closing down 2.35 cents, or 1.1 percent, at $2.1735 per lb. March robusta coffee on Liffe eased $7, or 0.4 percent, to end at $1,865 a tonne.

"It seems as if the CTAs (commodity trading advisers) and technical traders have lost a bit of their appetite for coffee," a US dealer said.

Certified robusta coffee stocks held in NYSE Liffe nominated warehouses fell to 235,840 tonnes as of Jan. 23, from 246,580 tonnes on Jan. 9, exchange data showed.

Dealers said the drawdown in certified stocks was partly in anticipation of Vietnam shutting down for its Tet holiday.