Cocoa resumes slide, raw sugar premium climbs

Raw sugar was little changed as dealers focused on October options expiry on Thursday and October/March spreading lifted the spot contract to a 2-1/2-month premium. Arabica coffee inched down in consolidative dealings while robusta dropped to a five-week low.

The softs complex was weak along with other commodities as optimism faded over favorable comments for the creation of euro zone bonds and as US retail sales data was lackluster.

"The macro situation is now focusing on the French banking industry with the ratings agency's marking down some market leaders, and the dollar is strong versus the euro," said Nick Penney of brokerage Sucden Financial.

Cocoa futures on ICE extended losses to a nine-month low, hitting sell-stops below support around $2,850-$2,860.

"There is some harvest pressure," said Keith Flury, a senior soft commodities analyst with Rabobank.

Both London and New York cocoa markets have been pressured by the large global surplus in the current 2010/11 crop year.

ICE December cocoa slipped $55, or 1.9 percent, to finish at $2,810 a tonne, the lowest settlement for the second position since Dec. 1, 2010.

"If we don't recover, we could see a number of longs head for the bleachers pretty quick," said Sterling Smith, analyst for Country Hedging in Minnesota, referring to speculative longs.

London December cocoa settled down 27 pounds, or 1.5 percent, at 1,823 pounds per tonne in heavy volume above 11,000 lots and at the lowest finish since June 6.

Raw sugar futures on ICE fluctuated on either side of unchanged as dealers eyed the October contract as its premium to March rose to 1.56 cents per lb, significantly above last week when it traded as low as 0.57 cent.

"The back end of the curve is coming down a bit, with people seeing a global sugar surplus of 5-9 million tonnes in the new season (2011/12)," Flury said.

ICE October raw sugar futures inched up 0.01 cent to 29.40 cents a lb by 12:11 p.m. EDT (1611 GMT).

The October contract was gravitating to the 29.50-cent level as dealers focused on October options at this price ahead of its expiry Thursday, dealers said.

October white sugar futures on Liffe, which expire on Thursday, reversed up $1.80 to $748.80 a tonne.

ROASTER BUYING

ICE arabica coffee futures reversed down, with the December contract down 1.45 cents to $2.6885 per lb. The decline attracted roaster buying.

"At the $2.60-2.70 level, roasters are coming in and buying," Flury said.

The market continued to consolidate after last week's steep fall and ongoing concerns about tight supplies of washed beans prevented deeper losses.

Macquarie's latest Agri-view report on arabica coffee said, "The market in the current 2010/11 season is one of the tightest it has been historically, and will remain so until we get to the next Brazilian harvest due mid-2012."

Arabica exporters in Indonesia's main growing island of Sumatra have renegotiated contracts with buyers after prices spiked in New York, but some shipments have resumed, a senior industry official said.

"With the news that we're seeing Indonesian beans moving again, we're going to keep the speculators under control," Smith said.

November robusta coffee on Liffe dropped $50, or 2.3 percent, to $2,094 per tonne, the lowest since Aug. 9.

Copyright Reuters, 2011