NEW YORK/LONDON: ICE raw sugar futures sank on Thursday, under pressure from technical selling and spread-related trade, as a large expected July delivery weighed, while ICE arabica coffee posted its biggest gain since early May on short covering.
Cocoa futures closed down, weighed by long liquidation.
July raw sugar futures on ICE Futures US were down 0.54 cent, or 3.2 percent, at 16.47 cents a lb.
Sugar extended losses after the most-active October ICE contract sank below the 17.14-cent level.
"We broke through Tuesday's low, which brought in some liquidation," said Michael McDougall, senior director of the Brazil desk for Newedge in New York.
The technical selling pushed the October contract below 17 cents a lb before it pared losses to settle down 0.32 cents, or 1.8 percent, at 17.01 cents a lb.
Expectations of a large July delivery pushed the front month to steep losses, as the July/October spread surged to 0.54 cents a lb from 0.32 cent previously.
The jump put the second-month contract at its widest premium to the front month since September, ahead of the October 2012 contract expiration when merchants stocked up, fearing supply disruptions.
Traders said the steep increase in the spread might draw some to roll forward positions rather than deliver.
Early trader estimates pegged the expected delivery as high as 1 million tonnes, and Mexico, Central America, Argentina and Brazil were the expected origins.
Brazilian cane crush data issued earlier this week was seen as bearish by many, with the volume remaining high despite recent rains.
"Clearly, the recent rain delays have done little to dampen overall crushing volumes," said analyst Luke Mathews of Commonwealth Bank of Australia.
August white sugar on Liffe fell $10, or 1.9 percent, to $507.80 per tonne, its steepest loss since January.
SHORT COVERING BOOSTS COFFEE
September arabica coffee on ICE surged 3.45 cents, or 2.9 percent, to finish at $1.2190 per lb, the second-month contract's steepest daily gain in almost two months.
The second month has been trading sideways since touching an almost four-year low of $1.1710 on June 20, establishing a short-term bottom and prompting speculators to cover short positions, dealers said.
"The market is oversold pretty dramatically," said Stephen Platt, analyst at futures brokerage Archer Financial Services.
"There's short covering and you are seeing some bargain hunting."
Arabica coffee has been weighed by expectations of a bumper off-year crop in top producer Brazil. Prices have been falling for more than two years after trading at more than $3.00 per lb in May 2011.
September robusta coffee futures on Liffe closed up $20, or 1.2 percent, at $1,745 a tonne.
ICE cocoa futures were lower as investors continued to trim a large net long position.
"The market is fairly long on cocoa, and if you see substantial unwinding by investors in the next few weeks you could see some weakness in the market," Credit Suisse analyst Karim Cherif said.
Liffe September cocoa edged down 5 pounds, or 0.3 percent, to settle at 1,449 pounds a tonne.
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