Liffe September cocoa ended 7 pounds weaker at 1,793 pounds a tonne on Monday after hitting a 21-month low for the benchmark second month of 1,787 pounds. Supplies remain plentiful with a large global surplus seen in 2010/11. Liffe September robusta coffee ended off $79 at $2,449, just above its low of $2,445 which was the weakest level for the benchmark second month since late April. Market dragged down by steep setback in ICE arabica coffee futures.
Liffe August white sugar closed $2.80 firmer at $696.20 a tonne. Market supported by talk that this year's cane crush in Brazil may be lower than previously anticipated. Cocoa eased in choppy trade as dealers focused on the narrow difference between London and New York futures prices. Arabica coffee roasters were viewed as well covered after buying into falling prices in recent weeks, while origin and investor selling picked up.
"I think we're just re-establishing the idea that Brazil is going to be selling coffee and the economic recovery is slowing," said James Cordier, senior analyst of brokerage optionsellers.com in Florida. Still, the outlook for supply in the coming crop year is tight as steady demand growth and low stocks underpin the market. "We might have had bumper crops in 2010/11, but the next season has more uncertainty about available supply and whether or not there's going to be a surplus or a deficit," Rabobank analyst Keith Flury said.
"The earlier, temporary closer of the Dubai Al Khaleej refinery reduced supplies for the quarter," a senior Western analyst said. The Dubai refinery restarted production on April 23 after a two-week shutdown due to slow demand. As other commodities dropped on concerns about slowing global economic growth, the raws held up relatively well with most market activity in spread trade or switch activity as players moved positions out of July before it expires at the end of the month, dealers said.
"Unless something pops up on the (Brazilian center-south) cane crop, there's no reason to go below 22 or go above 24," said Alex Oliveira, senior sugar analyst at brokerage Newedge USA in New York. Nick Penney of brokerage Sucden Financial said that despite excellent weather for harvesting in the centre-south of Brazil, market watchers remained convinced that this year's cane crush would be much lower cane crush than previously forecast.
Dealers kept eyeing the narrow difference between futures prices in London and New York, which historically trades at a wider discount. The difference has narrowed due to tight supplies in Indonesia, the United States' traditional supplier, and the release of stocks from Ivory Coast. "I think that people will try to switch as much as they can from selling to Europe to selling to the US," Flury said.