New York cocoa futures on ICE fell more than 2.5 percent to the lowest in more than two months on Monday, pressured by broad-based selling on concerns about global economic growth and the weak British pound, while raw sugar dropped sharply. Arabica coffee pared losses after falling 3.7 percent in early and illiquid dealings, pressured by the weak currency in top grower Brazil.
China's factory activity shrank, while a flare up in tensions between Saudi Arabia and Iran exacerbated uncertainty about the economic outlook, causing investors to sell markets viewed as risky. New York cocoa fell in heavy volume, after closing 2015 as the biggest gainer on the Thomson Reuters Core Commodity Index, on pressure from the weak British pound and chart-based sell signals, traders said.
Exporters in top grower Ivory Coast estimated that bean arrivals there were only just below last year's levels, giving a bearish tone to the market, traders said. "That's not bullish and we had a record crop out of Ivory Coast last year," said Nick Gentile, managing partner of commodity trading advisor NickJen Capital in New York.
ICE March New York cocoa settled down $87, or 2.7 percent, at $3,124 per tonne, the lowest since late-October. The move caused the March/May spread to fall to a $1 discount, inverting the two contracts for the first time since August. London cocoa settled down 53 pounds, or 2.3 percent, at 2,209 pounds per tonne. Raw sugar also fell, pressured by the weaker Brazilian real.
"Everything's bearish. It's risk-off (selling)," Gentile said, adding that pressure is also coming from "people front-running the index rebalance." ICE March raw sugar settled down 0.27 cent, or 1.8 percent, at 14.97 cents per lb, having ended 2015 up nearly 5 percent. Total open interest surged by nearly 18,600 lots in the past two sessions to 878,554 lots on December 31, the highest since June, exchange data showed.
"With forecasts for wet weather at the beginning of 2016 in center-south Brazil areas, the outlook seems to be favourable for sugar despite the overall bearish tone affecting commodities in general," said Nick Penney, a senior trader with Sucden Financial Sugar. ICE March white sugar settled down $3, or 0.7 percent, at $419.20 per tonne. ICE March arabica coffee settled down 2.8 cent, or 2.2 percent, at $1.239 per lb, after ending 2015 down around 24 percent. ICE March robusta coffee settled down $2, or 0.1 percent, at $1,528 per tonne.
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