ICE cocoa extends its losses, sugar rebounds

NEW YORK/LONDON: Cocoa futures saw its biggest three-day tumble in four months on Thursday as the market absorbed a large global surplus, while raw sugar climbed.

Arabica coffee futures were also lower in an inside session, pressured by light profit-taking as the market waited for direction after falling from the highest level in nearly four months.

The euro hit a two-month low versus the US dollar as worries over worsening economic conditions in Europe and the United States clamped down appetite for riskier investments such as agricultural commodities.

Dealers said there was large volume on the Liffe September/December cocoa spread at a discount as wide as 48 pounds a tonne, its lifetime low.

"That reflects the bumper amount of cocoa which is coming in. Nobody really wants to hold on to cocoa at the moment," one London dealer said.

Most forecasts range from a 200,000-400,000 tonne global 2010/12 surplus.

"We have this big main crop coming and demand is down a little bit, from what I'm hearing," said Nick Gentile, head of trading at Atlantic Capital Advisors.

"Industry have been the buyers of the futures contract. I'm pretty sure their physical book is pretty well protected."

December cocoa on ICE dropped $43, or 1.5 percent, to close at $2,911 a tonne, the lowest close for the contract since Aug. 12.

Prices on Liffe also slid with December ending down 30 pounds, or 1.6 percent at 1,861 pounds a tonne, its weakest settlement since Aug. 15.

Arabica coffee futures on ICE weakened as the market consolidated lower, despite continued tight supplies of washed arabicas following several below-expectation crops in Colombia.

"I still think there's more room to the downside on a technical correction," Gentile said.

"We still feel there is some fundamental reason to play coffee from the long side although there's already talk about how Brazil's going to have a 61-million-bag crop (in 2011/12)."

The benchmark December arabica contract climbed more than 23 percent in less than four weeks, reaching a near-four-month high at $2.9085 per lb before falling recently.

ICE December arabica coffee futures dropped 0.65 cent, or 0.2 percent, at $2.8385 per lb by 12:44 p.m. EDT (1644 GMT), after rebounding from a session low of $2.81.

Robusta coffee futures on Liffe climbed, with November closing up $46 at $2,219 a tonne.

Vietnam, the world's second-largest coffee producer after Brazil, will run out of beans soon and have no stocks to carry forward to the next 2011/2012 season, an industry official said.

ICE raw sugar futures rose on spread-linked purchases and support from concern about the crop outlook in top exporter Brazil following recent downward revisions to production estimates. The market remained range-bound, however, as players kept a cautious eye on macro economic influences on commodity trading.

"We believe there is now a stark realization in the market that more investment is needed in Brazil's sugar sector if it is to continue to support global sugar demand," Standard Chartered analyst Abah Ofon said in a Thursday market note.

ICE October raw sugar futures were up 0.51 cent, or 1.8 percent, at 28.92 cents a lb.

"There's some background influences...but macros are still holding sway," said Mike McDougall, vice-president of brokerage Newedge USA.

He said news of a La Nina weather pattern reviving in the Pacific may induce more rains over India's cane growing areas and lead to increased dry weather in No. 1 producer/exporter Brazil.

October white sugar futures on Liffe rose $7.40, or 1.1 percent to settle at $763 per tonne.

Copyright Reuters, 2011