NEW YORK/LONDON: Cocoa futures dipped to the lowest in nearly three years on Monday as the deepening economic crisis in Europe combined with bearish market fundamentals drove prices lower.
Raw sugar reversed up after touching a fresh five-month low, while coffee futures also eased, with volume thin in the United States ahead of the Thanksgiving holiday on Thursday.
Shares on Wall Street hit a one-month low, extending losses from across Europe as fears about out-of-control government debt on both sides of the Atlantic hit financial markets.
"The sell off is not confined to agricultural markets, it's prevalent across raw materials," Tobias Merath, commodities analyst at Credit Suisse said.
"Financing is a big issue; it's needed to ship raw materials, for hedging and for credit lines to trade derivatives. We have a drying up of liquidity."
ICE cocoa prices were lower with plentiful supplies as main crop harvests in West Africa gather pace, adding to the market's current bearish mood.
"We have a good amount of inventories carried over from last season and the current season is going to be another bumper crop so the potential is for a very burdensome supply-side situation, that's clearly weighing on the market," said Kona Haque, soft commodities analyst at Macquarie Bank.
March cocoa on ICE closed down $44, or 1.8 percent, at $2,414 a tonne, after touching $2,403, the lowest level for the second month since May 2009.
London March cocoa settled down 24 pounds at 1,541 pounds a tonne, after falling to 1,535 pounds, the lowest level for the second month since December 2008.
Dealers said farmers in top producer Ivory Coast remained reluctant to sell into a falling market.
Cocoa arrivals at ports in top grower Ivory Coast reached around 235,000 tonnes by Nov. 20, exporters estimated on Monday, compared with 331,959 tonnes in the same period of the previous season.
"Continued uncertainly and indecisiveness among many of the world's leaders and governments has traders continuing to hold back or put on less size," said Bill Raffety, senior analyst for futures brokerage Penson Futures in New York.
"We are also looking at Thanksgiving on Thursday and some will be taking additional days off this week."
SUGAR SLIPS
Raw sugar futures hit a five-month low early, but turned higher on buying by small investors as business thinned out due in part to the upcoming US holiday, analysts said.
"Brazilian dynamics should support sugar prices near current levels in the short-term, although we see weaker prices medium term," HSBC said in a global research note.
Brazil's largest sugar exporter, Cosan, sees the 2011/12 center-south sugar cane crop ending at 485 million tonnes and expects an 8 percent increase from next year's crop.
ICE March raw sugar futures turned up 0.15 cent, or 0.6 percent, to 24.12 cents a lb, by 12:17 p.m. EST (1717 GMT). The contract dipped to 23.86 cents earlier in the session, its lowest level since June.
News that Egypt bought 110,000 tonnes of raw sugar from Brazil at a tender for January/February shipment at $614.50 per tonne CIF and that India has delayed a meeting of ministers to Tuesday to decide on sugar exports also gave the market a mild boost, dealers said.
March white sugar futures on Liffe rose $3.80 to $626.80 per tonne.
Arabica coffee futures on ICE were slightly lower as dealers continued to eye weather in Brazil during the key flowering period.
March arabica coffee futures on ICE were down 1.25 cents, or 0.5 percent ,to $2.3760 per lb, while January robusta coffee on Liffe was down $8 at $1,872 a tonne.
"Macquarie will be watching the weather closely because any rain could help yields," Haque said.
The bank expects Brazil's crop next year to produce around 58-59 million 60-kg bags.
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