NEW YORK/LONDON: Raw sugar futures on ICE extended losses on Friday, in their biggest three-day tumble in a year, on fund selling, while dealers looked for signs that the fund liquidation had pushed the market low enough to stimulate physical offtake.
Arabica coffee futures on ICE turned higher after inching down to a five-week low as the expiry of November options kept the market jostling around the key $1.60-per-lb level. Cocoa turned higher after hitting the lowest level in more than two months.
Dealers waited for fresh news of physical offtake in the sugar market following Thursday's 4-percent tumble.
"The physical market has been quiet since the October expiry and prices are having to trade lower to uncover fresh demand," said Peter de Klerk, analyst at Czarnikow.
"The chat from the trade seems to be the bulls need to see a reaction from the end users/buyers to the recent slide," said Thomas Kujawa of brokerage Sucden Financial.
ICE March raw sugar futures dropped 0.41 cent, or 2 percent, at 20.04 cents a lb by 12:40 p.m. EDT (1640 GMT).
"It looks like the funds have reversed their course. The trigger was the washouts," said Michael McDougall, a vice-president for brokerage Newedge USA.
On Thursday, talk about sugar washouts centered on China and India weighed heavily on the market. Washouts are when buyers give up the obligation to take delivery by paying a penalty.
"It caused the funds, like a school of fish, to quickly turn around and head back down to a negative stance. They reversed course and the market's feeling it," McDougall said.
An Indian committee has recommended scrapping the mandatory norm of buying 10 percent of sugar mills' output for supplies to the poor, the chairman of the panel said.
December white sugar on Liffe fell $11.70, or 2.1 percent, to $556.70 per tonne.
ARABICA STOCKS BUILD
Arabica coffee futures turned higher in options-related dealings, as the serial-month November options were set to expire at the end of the day.
"There's a lot of pushing and shoving in the market today, on light trade though," said Hector Galvan, senior market strategist for RJO Futures in Chicago.
"The people who are in the 1.60 calls and puts are chomping at the bit right now."
December arabica coffee futures on ICE rose 1.40 cents, or 0.9 percent, to $1.6215 per lb, after touching $1.5970 earlier in the session, the lowest level for the front month since Sept. 7.
"The fundamental picture for arabicas is very bearish," said a London-based broker.
"Robustas could go higher as there's still a strong fundamental picture with good demand. There's been some selling of New York and buying of London this week."
Dealers eyed the coming expiry of November robusta coffee options next week, noting large open interest in the call option strikes between $2,100 and $2,500.
November robusta coffee futures closed down $24, or 1.2 percent, at $2,051 a tonne.
Cocoa futures turned higher after initially falling ahead of next Tuesday's third-quarter grindings data for Europe, which is expected to show a fall of 15 to 20 percent compared with the same period a year ago. The US market faced strong support around the 200-day moving average at $2,341 per tonne, basis December, and turned higher.
Traders said some European cocoa grinding factories continued to work on shortened hours due to weak demand.
"If the grind is down more than 20 percent it's very bad," said a London-based broker. "If it falls less than 12 percent you could see the market rise."
ICE December cocoa closed up $15, or 0.6 percent, at $2,366 per tonne, after dipping to its lowest level since July 31 at Reuters
March cocoa futures on Liffe also turned higher, closing up 5 pounds, or 0.3 percent, at 1,532 pounds per tonne, which is the 200-day moving average. Earlier, the second-position contract dropped to the lowest level since July 18 at 1,519 pounds.
Ghana has raised the farmgate price for cocoa this season to a level sharply higher than that in neighboring Ivory Coast, sparking worries of heavy smuggling between the world's two top growers this season.
"Right now we are looking at a 180 CFA difference per kilo which is very big so you're going to see some smuggling for sure. I would say 100,000 tonnes minimum," said a European cocoa trader.
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