NEW YORK/LONDON: Raw sugar futures turned lower after tapping a three-week high on Thursday, as investors grabbed profits following a rally spurred by a 2014/15 crop forecast that raised concerns about production.
Arabica coffee futures on ICE Futures U.S. turned higher late in the session on late-day buying and after another bullish forecast for top grower Brazil's drought-damaged 2014/15 crop helped lift the market off its lows. Cocoa futures on both ICE and Liffe fell.
May raw sugar futures on ICE dropped 0.30 cent, or 1.7 percent, to settle at 17.12 cents a lb, after touching a three-week high at 17.59 cents.
"The market is vulnerable to fund liquidation down to 17.59 (cents) where support should be uncovered," said Sterling Smith, futures specialist for Citigroup in Chicago, in an email, referring to the July contract.
On Wednesday, Brazilian cane industry group Unica said a severe drought early this year led to a forecast for the world's biggest sugar grower's main cane belt region's output at 32.5 million tonnes, down 5 percent from 2013/14. This was at the low end of expectations. It caused the market to rally and extend gains early Thursday.
An extended rally "would most likely run into more Thai selling interest to unload a stock overhang," Michael McDougall, senior vice president of Newedge USA, said in a report.
"The immediate scenario is for continued sideways trading, unless weather intrudes," he added.
"We were surprised by the strength of the price reaction to the Unica numbers," said Tracey Allen, commodities analyst at Rabobank International. "From current levels we expect a selloff in the next few days."
The sugar market is focused on next week's expiry of the ICE May contract, with some dealers seeing Central American and Mexican sugars potentially delivered against the expiry.
August white sugar on Liffe eased by $3.70, or 0.8 percent, to close at $476.10 a tonne.
In arabica coffee, futures initially slipped on speculative selling and as dealers closed positions after Wednesday's rally. The market then pared its losses with dealers citing a 2014/15 Brazilian coffee forecast of 44.25 million 60-kg bags released by Citigroup, down 7 percent from its March forecast. This is at the low range of estimates.
"People sold it early and then that Citigroup report came out, which is now the lowest non-Brazilian number out," one U.S. dealer said.
July arabica coffee futures on ICE ended up 0.85 cent, or 0.4 percent, at $2.1480 per lb, after climbing in light volume on Wednesday to a peak of $2.1900, the highest level for the second month since February 2012.
Dealers said hot, dry weather in Brazil earlier this year looked set to reduce both the size and quality of this year's coffee crop, potentially leading to a substantial global deficit in the 2014/15 season.
"There is still a lot of uncertainty around over coffee production forecasts," Allen said.
A volatile wave of buying in the last half hour of trade lifted arabica futures into positive territory before they tumbled back down again, leaving traders uncertain of the cause.
July robusta coffee on Liffe eased $4, or 0.2 percent, to finish at $2,166 a tonne.
Cocoa on ICE fell in rangebound trade.
ICE July cocoa ended down $29, or 1 percent, at $2,979 per tonne. July cocoa on Liffe closed down 19 pounds, or 1 percent, at 1,863 pounds a tonne.
"A close below the 40-day moving average at 1,867 pounds opens potential for further declines towards April's low at 1,843, which acts as immediate support," said Myrto Sokou, senior research analyst with Sucden Financial.
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