London cocoa futures fell sharply to an 18-day low on Tuesday driven by speculative, trade and origin selling and weighed by a stronger pound. Robusta coffee settled lower in a mild setback after Monday's strong advance and sugar traded firmer after a choppy session of two-way speculative trade, capped by ongoing concerns over a global oversupply of the sweetener, dealers said.
London December cocoa closed down 33 pounds or 3.5 percent to 962 pounds per tonne in brisk volume of 10,407 lots, having earlier touched an 18-day trough of 950 pounds which dealers called a strong support level.
London cocoa futures dropped suddenly and sharply in sympathy with US futures in mid-afternoon trade, dragged down by the US market on liquidation of long positions by speculators and trade houses, and on origin selling.
"The specs in New York ran out of ammo on the buy side," one dealer said. "This panicked the longs. They said, 'Thanks very much. Get me out of here.'" A strengthening pound also dragged on the London market as pound-denominated futures became more expensive to investors holding other currencies.
"The stronger pound is weighing. The tone looks weaker because a big West African crop is coming," one London dealer said, referring to expectations of an abundant 2007/08 West African main crop.
Sterling rose to a two-week high against a basket of currencies on Tuesday, bolstered by talk of a 740 million pound rescue package for UK mortgage lender Northern Rock. London robusta coffee futures closed down as the market suffered a mild setback after Monday's strong advance.
November settled down $18 at $1,952 but other contracts showed smaller losses with November's premium to January slipping to $135 from $144 on Monday. "New York has dropped back a bit. We will see if it (New York) has the guts to hold on (to Monday's sharp gains)," one dealer said. Traders said light volumes partly reflected the recent volatility in the November/January spread.
"Given the current movements in the spreads the trade are being very cautious," the dealer said. "They are not taking on risk at the moment and that is leaving the market very thin." London white sugar futures traded slightly firmer on choppy, two-way speculative trade, but the market remained pressured by a huge oversupply of the sweetener. December settled up $1.80 to $278.00 per tonne in reasonable volume of 4,530 lots.
Dealers said white sugar futures changed from negative to positive territory in the afternoon, propelled by the US raw sugar market. A huge global oversupply is dragging on the sugar market, led by hefty output in sugar powerhouses Brazil and India. Recent freight enquiries to move raw sugar from India to the Black Sea have turned the spotlight on prospects for the start of Indian sugar exports to Russia.
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