NEW YORK/LONDON: Soft commodity markets turned in a muted performance on Friday as players were sidelined after a week which saw a sharp selling spree sparked by the US credit downgrade.
Sugar, coffee and cocoa paid little heed to the macro environment. European stocks rallied due to a ban on bearish bets while investors digested news that US consumer sentiment slid to its lowest in over three decades.
"The softs complex was influenced by the capital markets action globally. Even though the fundamental picture in a number of the softs is tight they followed the financials lower as they continue to rattle consumer confidence," Bill Raffety, senior analyst at commodities brokerage Penson Futures, said.
Raw sugar slipped after news that India, the number 2 producer after Brazil, decided to allow another 500,000 tonnes of unrestricted sugar exports. Short-covering pared those losses, dealers said.
The key October raw sugar contract rose 0.02 cent to trade at 28.10 cents per lb at 12:17 p.m. (1617 GMT). Liffe's October white sugar futures fell $5.20 to trade at $744.50 per tonne.
The market was supported by cuts in Unica's forecast for center-south Brazil sugar production to 31.57 million tonnes, from its July estimate of 32.38 million tonnes.
"The Unica data is a support rather than a driver for the market," said Macquarie analyst Kona Haque.
A combination of weather factors and aging cane led analysts to revise down their cane output forecasts.
Raw sugar futures have fallen by around 12 percent since hitting a contract high of 31.68 cents a lb last month on crop concerns in Brazil.
COCOA MIXED, COFFEE MOVES UP
US cocoa futures crept higher in the thinnest market volume in about two weeks as September/December spreading continued in a much lighter fashion after weeks of heavy position rolling before first notice day Aug. 18.
"Cocoa is a technical buy today. We filled the gap at $2,805 on the December contract yesterday and we're having a technical rally on that today," said Jimmy Tintle, analyst with Transworld Futures in Tampa, Florida.
Raffety said cocoa is also pressured by more than adequate supplies in the market and a large 2010/11 global surplus.
ICE Futures US December cocoa contract rose $21 to end at $2,907 a tonne and London's September cocoa futures gained 4 pounds to close at 1,838 pounds a tonne.
US cocoa futures were still in a downtrend after the mid-range 26-day and 40-day moving averages crossed above the market, around $3,060 per tonne, earlier this week.
Arabica coffee futures were little changed, as some September/December position rolling continued ahead of September's first notice day Aug. 23.
The key December arabica coffee contract gained 0.15 cent to trade at $2.442 per lb at 12:19 p.m. and London's September robusta futures jumped $87 to trade at $2,277 per tonne.
"Coffee prices continue to be vulnerable to downward corrections, as the frost season in Brazil nears its end," the International Coffee Organization said in a monthly report.
Preliminary reports suggest that any damage to next year's crop in Brazil due to frost, will be minor, the ICO said.
Copyright Reuters, 2011
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