NEW YORK/LONDON: Cocoa dropped to its lowest in more than two years on Thursday on good crop prospects in West Africa, while coffee and raw sugar were mixed as the commodity complex reversed higher.
The euro and risk assets such as stocks and crude oil rose after an Italian debt auction went better than expected and signs of new governments in Italy and Greece eased fears of a euro zone break-up.
"Right now the (Ivorian) harvest looks good. They've had a second year of pretty decent weather," said Erica Rannestad, commodity analyst with CPM Group in New York.
After the December cocoa options contract expired last week, focus has shifted back to futures, large global supplies and the December/March spread, dealers said.
Focus in the US cocoa market had been on options, which had attracted interest to the correlating December futures contract. Open interest in both markets went to record highs.
ICE March cocoa dropped $44 or 1.7 percent, to finish at $2,559 per tonne, after falling to the lowest since July 2009 at $2,548. Benchmark Liffe March cocoa futures settled down 28 pounds, or 1.7 percent, at 1,605 pounds a tonne, after falling to 1,603 pounds, also the lowest for the second position since July 2009.
"Cocoa prices slumped ... pressured by increased flow of main crop cocoa out of West Africa combined with broad-based weakness in commodity markets," Barclays Capital said in a daily commodities note.
Coffee prices were mixed and little changed after the Reuters-Jefferies CRB index, a global benchmark for commodities, reversed slightly higher.
"People will stay glued to the macro developments in the euro zone and will be reluctant to trade actively until they know more about what's going to happen," said analyst Andrey Kryuchenkov of VTB Capital.
ICE December arabica coffee inched down 0.2 cent to $2.30 per lb by 1:05 p.m. EST (1805 GMT), while Liffe January robustas closed up $1 at $1,837 a tonne.
"People are on the sidelines in the market," said one ICE floor dealer.
The International Coffee Organization said early in the day that world 2011/12 global coffee output is expected at 127.4 million 60-kg bags, down from the previous estimate of around 130 million bags, yet the market failed to respond, the dealer said.
"The market is getting very confused signals; it's getting bullish signals from Brazil where differentials are very strong, but on the other hand, it's getting bearish Central American signals as Peru and Honduras coffee is being graded and boosting ICE certified stocks," said James Hearn, joint head of agriculture at Marex Spectron.
ICE certified arabica stocks rose by a steep 15,684 bags to 1,316,490 bags by Nov. 9, with a heavy 273,610 bags pending grading.
Raw sugar futures were trading on ICE in a tight band with most players content to stay on the sidelines while monitoring the protracted debt crisis in Europe, while talk that Egypt may be in the market for some sugar gave a mild boost, dealers said.
"There's (cash) buying interest, but the market's very nervous about the Italian bond situation," said Mike McDougall, vice-president for brokerage Newedge USA.
A spike in Italian bond yields on Wednesday boosted the dollar and sparked a sell-off in commodities and other financial markets as Europe struggled to contain a crisis that could possibly overwhelm public finances on the continent.
ICE March raw sugar futures were up 0.24 cent at 25.60 cents a lb.
Prices below 25 cents are expected to stimulate demand on the physical market, dealers said.
Liffe December white sugar closed down $2.70 at $674.80 per tonne.
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