Sugar and coffee futures crumbled Wednesday and cocoa hit a fresh three-year low as investors dumped many commodities amid new doubts that Europe can forge a deal to end its prolonged debt crisis. Pessimistic comments from EU paymaster Germany and new figures exposing growing stress among Europe's banks took the shine off financial market hopes of a turning point in the eurozone debt crisis at a summit this week.
The biggest hit was in raw sugar futures, which dropped more than 4.5 percent during trading on the souring economic environment. London white sugar futures fell 3.5 percent during Wednesday's session. ICE March raw sugar futures dropped 1.13 cents, or 4.67 percent, to close at 23.05 cents a lb, having hit a session low at 22.99 cents.
London's March white sugar futures on Liffe closed down $21.80 at $603.60 a tonne.
"It's a macro sell-off," said Alex Oliveira, senior sugar analyst at brokerage Newedge USA. The market digested news that Cargill's head sugar trader, Jonathan Drake, has left the company. The Price Group senior analyst Jack Scoville said sugar must also contend with the prospect of bumper supplies going forward and slack cash demand. But the macro factor cannot be discounted at this time.
VM Group analyst Gary Mead said expectations of big northern hemisphere crops augured for downside price risk in sugar. Physical sugar trade has been moderate this week, with soft Thai premiums undercutting Brazilian sugar in Asia, and Indian exports being offered in the market, dealers and brokers said on Wednesday. London's March cocoa futures fell 24 pounds or 1.7 percent to finish at 1,383 pounds a tonne, just barely above the new lifetime low of 1,381 pounds, the lowest for the benchmark second month since late 2008. March cocoa on ICE fell $26 to end at $2,142 a tonne, also the lowest settlement for the second position contract since late 2008.
The contract hit a session low of $2,137. The benchmark March contract on ICE Futures US has fallen more than 20 percent in the past month. The abundant supply is due mainly to a big harvest in Ivory Coast, the world's No 1 producer, and in Ghana, the No 2 grower.
Coffee, along with sugar, was battered by the macro-induced selling spree. New York's March arabica coffee contract fell 5.90 cents or by 2.5 percent to end at $2.2985 a lb at. London's January robusta contract slid $54 or by 2.6 percent to finish at $1,990 a tonne. Vietnam's 2011/2012 coffee crop would yield up to 1.25 million tonnes, or 20.83 million bags, rising 8.7 percent from the previous harvest, and farmers are expected to end the cherry picking process in January, a senior industry executive said.