Tuesday, 11 December 2012 02:16
NEW YORK/LONDON: Raw sugar futures on ICE flirted with the lowest level in nearly 2-1/2 years on Monday, and arabica coffee also tumbled after reports from top producer Brazil emphasized plentiful supplies for both markets.
Cocoa futures trading on both ICE Futures US and Liffe eased while the premium of the spot contract in London grew.
Raw sugar extended its losses after Brazil's industry association Unica said its can, sugar and ethanol production surged in the second half of November in its main center-south cane belt after dry weather helped ensure smooth crushing.
Total sugar production for the season reached 32.9 million tonnes, compared to last year's output of 31.1 million tonnes as of Dec. 1, Unica said in its bi-weekly report.
March raw sugar futures on ICE were down 0.41 cent, or 2.1 percent, to 18.80 cents a lb by 12:24 p.m. EST (1724 GMT), having hit a session low at 18.72 cents. The contract hit 18.66 cents last month, its lowest level since August 2010.
"We've seen the March/May spread and the May/July spread weaken over the last few sessions," said James Kirkup, director of sugar brokerage at ABN AMRO Markets.
He noted that strong tail to Brazil's crop has probably boosted availability into March.
Dealers said the recent weakness in the market was likely due to the expectation for this surge in production while the discount of the spot contract widened versus the second position. On Monday, this spread widened to around 0.16 cent, from a premium of 0.02 cent one week prior.
"The market is rangebound but it seems a thorough test of the lows is in the offing," Nick Penney of Sucden Financial said in a market note.
Speculators trimmed their net short position in raw sugar contracts on ICE Futures US in the week to Dec. 4, US Commodity Futures Trading Commission data showed on Friday.
March white sugar on Liffe fell $8.60, or 1.7 percent, to $506.90 per tonne.
Arabica futures on ICE also sank, after an exporter in top grower Brazil forecast a huge 2013/14 coffee crop and the move lower triggered automatic sell orders, dealers said.
Brazilian coffee exporter Terra Forte said on Monday it expected next year's 2013/14 crop to produce 53.4 million 60-kg bags of coffee, 2 percent more than its estimate for this year's crop despite a cyclical dip that would normally cut production.
March arabica coffee futures sank 6.15 cents, or 4 percent, at $1.4785 per lb.
The contract gave back most the gains from all of last week, when it rebounded from a 2-1/2-year low at $1.6535 per lb.
"Disappointed longs are once again bottom picking coffee and get no strong rally, so they dump," said one US dealer, referring to some long-liquidation that weighed on the market.
Speculators trimmed their net short position in arabica futures and options slightly last week, although it remains large and down only 8 percent from the nearly 36,000 lots they held a few weeks prior, the highest since records were made available in 2006.
Long-term, however, Shawn Hackett of Hackett Financial Advisors in Florida is bullish.
"The technical picture on coffee is extremely bullish," Hackett said in a note, adding prices had come down to a long-term bull uptrend line that has held for over a decade.
March robusta coffee futures were down $22, or 1.1 percent, at $1,882 a tonne.
Cocoa futures on Liffe were lower with the flow of cocoa from West Africa picking up after a slow start linked to dry weather, which delayed early crop growth.
Cocoa arrivals at ports in top grower Ivory Coast reached around 425,000 tonnes by Dec. 9 since the start of the season in October, exporters estimated on Monday, compared with 509,852 tonnes in the same period of the previous season.
Dealers were also keeping a close watch on the aftermath of a presidential election in number two cocoa producer Ghana.
Electoral authorities said on Sunday that incumbent John Dramani Mahama won a new term in the West African state in an election the opposition said was marred by tampering.
"It all looks relatively calm so I don't think there are going to be any problems," one dealer said.
March cocoa on Liffe closed down 26 pounds, or 1.7 percent. to settle at 1,520 pounds a tonne, while March cocoa on ICE dipped $33, or 1.4 percent, to settle at $2,379 a tonne.
The premium for the December contract on Liffe climbed to around 75 pounds, the highest since August 2010, after closing at 74 pounds on Friday.
The open interest on the Liffe December contract, which expires on Wednesday, fell 4,999 lots to 12,535 lots, as of Friday.
Center>Copyright Reuters, 2012