NEW YORK/LONDON: Sugar, coffee and cocoa futures sagged Tuesday on speculative fund selling that developed after Federal Reserve chairman Ben Bernanke said the bank is ready to take more steps to stimulate the economy.
"I think commodities in general are being pressured as Bernanke's comments are working to firm the dollar up a little bit and that is translating into some lower commodity prices, with gold really leading the way down," said Sterling Smith, vice-president of commodity research at Citibank's Institutional Client Group.
"It's looks to me to be entirely macro-based here. He's not really signaling any imminent quantitative easing," Smith said. "The feeling I'm drawing from this is he's going to need to see something that will cause any real deflationary fear before we see any large scale asset purchases."
The key October raw sugar contract fell 0.14 cent to trade at 22.63 cents per lb at 12:05 p.m. (1605 GMT).
White sugar futures on Liffe eased, with October down $1.70 to trade at $614.40 per tonne.
Sugar's future trading direction may be dictated by weather in top producers Brazil and India.
Rainy weather in Brazil in May and June, which delayed the harvest and contributed to bottlenecks at the ports, has let up in the first two weeks of July. This is expected to improve the volume of sugar and ethanol produced by mills over the fortnight.
"The Brazilian crush, which experienced a wet June, is now getting better weather," said Keith Flury, senior soft commodities analyst with Rabobank, adding, however, that worries continued about the flagging progress of the monsoon in India.
Thomas Kujawa of brokerage Sucden Financial said the recurrence of El Nino, a phenomenon that can cause excessive rain in Brazil, may "affect crushing, especially towards the end of the harvest."
For now, raw sugar values basis spot month seem pinned between 22.30 and 22.90 cents, according to Mike McDougall, vice-president of brokerage Newedge USA.
Expectations of a big global surplus of sugar also weighed on the market.
"The market may need to absorb a steady and more active harvest in Brazil, and the world faces a significant production surplus for the coming season," said Kamal Jain of Kamal Jain Trading Services Pvt. Ltd.
Louis Dreyfus Commodities Swiss SA took delivery of 166,900 tonnes (3,338 lots) of white sugar at expiration of the Liffe August futures contract Monday, exchange data showed on Tuesday. The sugar's origins are Brazil, Central American and Thailand.
COFFEE DOWN, COCOA ENDS LOWER
Coffee and cocoa futures lost ground Benchmark September arabica coffee futures on ICE fell 3.15 cents or 1.7 percent to trade at $1.808 per lb, still well above the two-year lows touched in mid-June amid expectations then for a huge Brazilian harvest.
The September robusta coffee contract were down $12 or 0.5 percent to trade at $2,077 per tonne.
The worries that wet weather in Brazil could cause quality problems have since dominated sentiment.
"We've rebounded from an oversold position (in mid-June), and now we're near fair value in arabicas," Flury said.
Cocoa futures ended lower, weighed by concerns over the demand outlook after last week's sharp fall in European grindings sparked a market sell-off.
ICE September cocoa futures slipped $2 to close at $2,195 a tonne. London September cocoa dipped 1 pound to end at 1,501 pounds per tonne.
The North American grind is due on Thursday at 4 p.m. EDT (2000 GMT). Flury said he expected the second-quarter North American grind to be 5 percent or less than the same period a year ago.
Comments
Comments are closed.