Sugar futures edged lower on Thursday below 5-month peaks, weighed by improved flows of export sugar from Brazil, while coffee slipped on technical weakness. "Brazil is now at the peak of its harvest and you should be seeing a lot of Brazil selling and it's not happening," a European analyst said. "Partly it's currency, the real is strong, so farmers are waiting for higher prices."
Although the market has lost around 20 percent of its value in recent months, coffee prices remain at historically high levels, which Rabobank expects will trigger a supply response. "If this (supply) increase should fail to be accompanied by a proportional increase in total demand for the product, prices will probably fall once again, putting pressure on margins," Rabobank said in a coffee report.
Dealers noted the threat of frost was receding as the end of the month neared, with July being the riskiest month for frosts, which can damage Brazilian crops. Large Liffe exchange stocks of robusta coffee weighed on the London futures market. September robusta coffee on Liffe traded down $29 or 1.4 percent to $2,098 per tonne.
Last week Lausanne-based consultancy Kingsman SA pegged Brazil's key centre-south 2011/12 cane crop at 525 million tonnes, below Brazil's sugar industry group Unica's forecast of 533.5 million tonnes. "If things deteriorate further the market could take another step higher," a London-based trader said. Dealers said high prices, not far from five-month highs, were curbing physical demand as buyers hoped prices would correct lower.
"End users are waiting for a decline... they're targeting 29.0 - 29.5 cents," the trader said. October white sugar on Liffe fell $1.50 or 0.2 percent to $802.00 per tonne after touching a contract high of $821.00 on Monday. Cocoa futures were lower, as a bumper 2010/11 crop weighed, while expectations of a smaller 2011/12 crop underpinned prices. Liffe September cocoa futures was down 21 pounds at 1,869 pounds a tonne.
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