Liffe sugar, cocoa slide in commodities selloff

Liffe August white sugar fell $10.40 to close at $582.30 a tonne on Thursday weighed by broad-based losses in oil and other commodity markets as well as an improving supply outlook. Liffe July robusta coffee edged up $5 to close at $2,582 per tonne. Prices weighed by a fall in ICE arabicas and losses in other commodity markets. Liffe July cocoa ends 60 pounds lower at 1,885 pounds a tonne. Dealers are focused on the flow of West African mid crop cocoa to the ports.
"The day's decline in agriculture is entirely related to broader markets," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt, pointing to the sharp fall in oil and metal markets. "Sugar was already in a downward trend and the commodity sell-off exacerbates this move."
Upward revisions to estimates for Thai sugar output and ample supplies of new-crop centre-south Brazilian sugar weighed. "From what I am hearing, the centre-south Brazilian harvest is going off pretty well," Keith Flury, soft commodities analyst with Rabobank, said.
"There doesn't seem like there is a lot that can push prices higher," he added, noting that robust demand for the sweetener was a supportive factor. Flury said physical buyers appeared to be holding back, waiting for prices to fall further. "There does seem to be a pent-up demand to increase inventories, but no one wants to buy to re-stock supplies," he said.
Dealers said they expected Egypt to return to the market soon with a substantial buying tender, possibly as soon as this weekend, having cancelled a tender for 200,000 tonnes of raw sugar earlier this week. "The physical market will dictate how low the futures will go," said James Kirkup, head of sugar brokerage at ABN Amro (Markets) UK Ltd. "We've completely lost the upside momentum, there's weak long liquidation and hedging above the market," a London-based broker said.
"The whole commodity complex is coming under pressure." Dealers said that in the longer term, cocoa prices should be supported by market fundamentals following months of conflict in top producer Ivory Coast. "The political crisis in Ivory Coast has not helped improving the husbandry," a second London-based broker said. "The bull story is still there... big funds are square for the moment but they will have to make a decision and take a position. It's unlikely they will go short."
Arabica coffee futures fell, consolidating below the 34-year high hit earlier this week. "Prices for coffee and cocoa have to some extent been speculator driven. For these markets, this was a correction that was due," Fritsch said. Dealers said that historically high coffee prices are expected to trigger a supply response that will weigh on prices going forward.
"We see the arabica futures market falling to $2.20-$2.30 a lb in the next three or four months as funds and speculators liquidate positions in anticipation of a supply response next year," a Europe-based trader said. "If you look at the rise in prices since the middle of last year, there's definitely an incentive for producers to increase plantings and the use of fertiliser and crop maintenance," the trader said. Top coffee producer Brazil's harvest could also weigh on prices in the coming months, Rabobank's Flury said.