Raw sugar sinks to 10-month low, cocoa extends rebound

Raw sugar futures on ICE sank more than 3 percent to a 10-month low on Tuesday, reaching the most oversold level in two years as fund selling picked up. Cocoa prices rose to two-month highs, rallying for the second straight day on chart-based buying.
May raw sugar futures settled down 0.41 cent, or 2.3 percent, at 17.29 cents per lb, after falling 3.7 percent to 17.05 cents, the weakest for the front month since May 2016. On the 14-day relative strength index, the spot contract fell to around 24, indicating the most oversold level since March 2015.
The stumble caused May to fall to an intraday discount of 0.09 cent under July futures, the biggest in 1-1/2 years. It closed at a 0.01 cent premium on Monday. Total futures open interest rose for the third straight session on Monday to 781,701 contracts, a one-month high, ICE data showed, as futures prices fell. Dealers said the decline had been driven by fund selling against the backdrop of a favourable production outlook in top grower Brazil and the prospect of a rebound in Indian output next season after a poor crop this season.
"The funds are clearly lucratively still short selling like a juggernaut and standing in the way is only for the very brave," said Tom Kujawa, co-head of the Softs Department at Sucden Financial. May white sugar settled down $9.8, or 1.98 percent, at $485.9 per tonne, after dipping to $482.80, its weakest since June 2016. May New York settled up $38, or 1.8 percent, at $2,154 per tonne, after peaking at a two-month high of $2,187. May London cocoa settled up 8 pounds, or 0.5 percent, at 1,730 pounds per tonne, after climbing to 1,759 pounds, also a two-month top.
Dealers said short covering by funds using algorithms had helped to fuel the current run-up, with both markets holding above their 50-day moving averages after failing last week and showing signs of having found a bottom in early March. Speculators hold large net short positions in both New York and London markets as prices rebound above multi-year lows. Top cocoa grower Ivory Coast said it will lower its guaranteed price for farmers for the mid-crop. Robusta coffee futures remained rangebound with May ending down $25, or 1.1 percent, at $2,171 per tonne. May arabica settled down 0.5 cent, or 0.3 percent, at $1.4475 per lb.