NEW YORK/LONDON: ICE cocoa futures fell more than 5 percent on Monday, depressed by the prospect of hedge selling as top grower Ivory Coast announced it would start forward-selling its crop at an auction this week.
Coffee futures also fell as a firmer dollar and overall weakness in commodity markets helped to spark sales while raw sugar futures extended their losses in choppy dealings .
Ivory Coast has invited bids for an auction on Tuesday to launch the forward-selling of future cocoa crops but several exporters told Reuters they would not take part due to a disagreement over details of the top grower's sector overhaul.
"I think it will be interesting how many people participate and in what volume. I'm not sure that you will see a huge participation early on, but unquestionably the Ivorians are committed to selling the crop forward," said a European commodity fund analyst.
"We're going to get a lot of unseasonal selling between now and September," said the fund analyst, adding this was likely to weigh on the futures market.
March cocoa on ICE tumbled $126, or 5.2 percent, to close at $2,280 a tonne . The contract had risen to a peak of $2,480 on Friday, the highest level for the front month since mid-November.
The market extended its losses after falling below the 61.8 percent Fibonacci retracement level at $2,292, basis March.
Dealers said the market had also probably risen too far during the recent run-up, with both ICE cocoa and Liffe cocoa falling from their respective 100-day moving averages on Friday.
One veteran cocoa dealer in New York said the Ivorian 2012/13 crop auctions will have a slow start.
"The greater risk to the market is that it adds to the hedging flow at a time when Ivory Coast itself is still substantially long the current crop (2011/12) and Ghana has yet to start with their own 2012/13 crop marketing program," the dealer said.
"Ivory Coast and Ghana's 2012/13 selling puts a hard ceiling at or just above current market levels, and over time they both will have to meet the market no matter the level."
Dealers noted news that the International Cocoa Organization said that world stocks rose by 295,000 tonnes in the year to Sept. 30, 2011, less than most forecasts for the global cocoa surplus in 2010/11.
May cocoa on Liffe fell 74 pounds, or 4.7 percent, to settle at 1,489 pounds a tonne .
COFFEE HEADS LOWER
The euro and US stocks tumbled 1 percent as investors worried European Union summit would do little to help ease Greece's debt burden and avoid a disorderly default.
Arabica coffee futures on ICE were lower as the dollar strengthened and many other financial markets retreated, with bearish sentiment on technicals also weighing.
"(Looks) like a general risk aversion sort of day, combined with profit-taking," said Sterling Smith, analyst with Country Hedging in Minnesota.
ICE March arabicas fell 1.70 cents, or 0.8 percent, at $2.1560 per lb by 12:32 p.m. EST (1732 GMT).
Dealers noted Brazil will start selling arabica coffee stocks it bought to bolster prices in 2009, with coffee prices now roughly $1 per lb higher than when the stocks were first acquired.
Robusta coffee futures on Liffe also eased with the flow of Vietnamese sales picking up after the New Year holiday there .
March robustas slipped $22, or 1.2 percent, to $1,843 a tonne . The contract rallied from a low of $1,712 on Jan. 9 to a peak of $1,950 on Jan. 23 but now appears to be back on the defensive, dealers said.
Raw sugar futures on ICE were choppy after initially paring losses on resistance at 24 cents per lb, basis March, but later returned to fall through the key level on spillover pressure, reaching a two-week low, dealers said.
"Prices have slipped back since weather conditions in Brazil's main growing area are favorable and India is considering releasing an additional 1 million tonnes for export," Commerzbank said in a market note on Monday.
Raw sugar began trading with extended hours in a bid of attract more participation from Asian dealers.
One dealer said the market briefly found buying support following a strong trade on Liffe white sugar and the expectation that buyers in China would be active following the week-long holiday there.
March raw sugar dropped 0.28 cent, or 1.2 percent, at 23.92 cents a lb after touching 24.38 cents. London March white sugar futures eased $3.50, or 0.6 percent, to finish at $634.20 per t onne.
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