Many commodities received earlier support from a US debt deal aimed at avoiding an unprecedented default but turned lower after the June US ISM manufacturing figures dropped below forecasts to a two-year low.
"There are pretty big fears about the economy going around. The manufacturing data wasn't all that strong and that seems to have hurt things," said Jack Scoville, agricultural analyst at The Price Group in Chicago.
"Everybody's so ... jumpy about the latest hair trigger that it really doesn't take too much to jump out of things or pile out of things."
October raw sugar on ICE dropped 0.77 cent, or 2.6 percent, to 29.04 cents a lb by 12:20 p.m. EDT (1620 GMT), compared with a July 25 five-month peak of 31.68 cents a lb.
Further pressure came as No. 2 producer India made available 1.703 million tonnes of non-levy sugar quota, higher than the 1.56 million tonnes it had released last month, in expectation of higher demand during festival season.
The US Department of Agriculture allowed early entry for quota sugar, which dealers said tells the market that supplies are tight. The decision was no surprise.
Sugar-growing nations holding a US import quota can ship the sweetener from Sept. 1, a month earlier than usual, the Agriculture Department said on Monday.
The market shrugged off downward revisions in expectations for sugar output in top producer Brazil, the driver in the latest sugar futures rally.
Itau BBA said it saw risks that centre-south Brazilian sugarcane output, hit by a mix of weather factors and aging plants, could come below the latest forecast by industry group Unica of 533.5 million tonnes in 2011/12.
October white sugar on Liffe fell $7.40, or 1 percent, to $770 per tonne, having touched a contract high of $821.00 on July 25.
COFFEE BUCKS LOWER TREND
Arabica coffee futures on ICE crept higher as buying by roasters increased, dealers said.
"They're willing to start accumulating some positions, which they're going to need for this fall," Scoville said.
The benchmark arabica coffee contract fell below the 200-day moving average in late July and has been moving sideways ever since.
September arabica coffee on ICE inched up 0.90 cent to $2.4045 per lb.
A target at $2.37 per lb remains unchanged for New York coffee as a bearish triangle is contracting to a point, according to Reuters analyst Wang Tao.
"Technically it's looking bearish, but on the other hand you could say funds are oversold," a London-based broker said, adding he expected the market to move higher.
September robusta coffee on Liffe rose $7 to $2,099 per tonne.
Cocoa futures on ICE inched down to a six-week low at $2,946 per tonne, pressured by a bumper 2010/11 West African crop, weak sterling against the dollar, and investor selling, after speculators switched to a net short position.
"We had a very good run higher at the start of this year on concerns over the political situation in (top grower) Ivory Coast, and we're still retracing now," said Andrey Kryuchenkov of fund VTB Capital.
September cocoa on ICE fell $19 to close at $2,955 a tonne, while London September cocoa settled up 5 pounds at 1,857 pounds per tonne, boosted by the weak sterling.
Copyright Reuters, 2011