NEW YORK: Raw sugar futures on ICE ricocheted off a five-month peak and turned lower on Monday, as profit-taking and the macro impact of stalemated debt talks in the United States weighed on the sweetener.
Arabica coffee futures on ICE were quietly higher, regaining some ground after Friday's fall to a six-month low, while cocoa prices continued lower.
Both raw and white sugar futures hit lifetime highs earlier, on concern about tightening nearby sugar supplies in top grower Brazil, but they reversed lower.
"We didn't see too much in the way of follow-through buying," said Michael McDougall, senior vice president at brokerage Newedge USA. "I think it's just profit-taking."
The macro level is dominated by the drawn-out talks in Washington to raise the US debt ceiling, with an Aug. 2 deadline looming and raising the prospect Washington would default on its obligations, driving money into safe-have gold and Swiss francs.
"Most commodities are under pressure due to a lack of a debt agreement," said McDougall.
October raw sugar on ICE was off 0.70 cent, or 2.3 percent, at 30.64 cents a lb by 12:21 p.m. EDT (1621 GMT) after earlier hitting a five-month high for the spot contract at 31.68 cents. October white sugar on Liffe fell $15.70, or 1.9 percent, at $797 per tonne, after earlier setting a contract high of $821.
Brazil's sugar industry group Unica earlier this month cut its forecast for sugar production in the key center-south region to 32.4 million tonnes and a number of even lower forecasts have been issued by analysts in the last few days.
"We will see in the forthcoming harvest updates whether these concerns are justified or not and this will decide the short-term direction of the market," said F.O. Licht analyst Stefan Uhlenbrock.
A top industry body in India has sought the government's approval for an additional 500,000 tonnes of sugar exports in the year to September, a demand that, if met, could help ease global prices that are creeping up on supply worries from top exporter Brazil.
"Perhaps the bears have a friend at last," brokers Sucden Financial said in a market report on Monday noting the request from the National Federation of Cooperative Sugar Factories.
Cocoa futures continued to move lower after the US market posted its biggest decline in nearly three months on Friday, as a large global surplus in the current 2010/11 season was expected.
"There are hedgers who are selling into this market because they're afraid they won't get a chance at $3,000 cocoa anymore if the market does turn completely bearish," said Hector Galvan, RJO Futures senior market strategist in Chicago.
Technically, the market is also bearish, after ICE September fell through long-term moving averages last week.
September cocoa on Liffe settled 31 pounds lower at 1,870 pounds, a five-week low. September cocoa on ICE closed down $69, or 2.3 percent, at $2,996 per tonne.
Arabica coffee futures on ICE edged up although they remained within striking distance of Friday's six-month low. The market is still viewed as being in a downtrend after speculators increased their net short position to the biggest in 2-1/2 years, in the week ended July 19, US Commodity Futures Trading Commission data showed on Friday.
September arabica futures rose 1.65 cent, or 0.7 percent, to $2.4315 per lb. The spot contract touched $2.38 on Friday, its lowest level since January.
Dealers noted exchange stocks were falling and had now reached their lowest level in 11-1/2 years.
Robusta coffee futures on Liffe also rebounded with September up $65, or 3.1 percent, at $2,139 a tonne. The contract dipped to $1,985 last week, its lowest level since December 2010.
Copyright Reuters, 2011
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