Liffe November robusta coffee settled $36 lower at $1,792 per tonne after hitting a 21-month high of $1,843 on Monday. Prices turned lower, tracking an even sharper setback in ICE arabicas, with both markets heavily overbought after a strong advance, which saw arabicas hit a 12-1/2 year peak.
Liffe October white sugar futures ended $14.20 lower at $571.50 per tonne. Prices rose strongly during July on port congestion in Brazil but could be set to fall back when the bottleneck begins to ease. Liffe December cocoa ended 14 pounds lower at 2,171 pounds a tonne. Nearby premium stabilising following a steep decline to about 90 pounds from 180 pounds a couple of weeks earlier.
Dealers noted tightness in supplies of high quality arabicas following two consecutive poor harvests in Colombia although production in the South American country should improve in 2010/11. "I think the fundamentals of coffee at the moment are supportive of a rally but long-term I don't see that being sustained," said analyst Abah Ofon of Standard Chartered Bank. Charts were also seen as constructive.
Broad based gains in agricultural markets, led by a surge in the global wheat market linked to drought in Russia, provided a further supportive influence. Dealers said fund activity was the key driver for the recent strength of the coffee markets as funds continue to add to their long positions, betting prices will continue to rise.
"Further price increases in the short-term are likely due to investor demand," Eugen Weinberg, analyst at Commerzbank said. "There's been some Indonesian selling over the weekend which might have put London (robusta) coffee under pressure," a London-based broker said. Raw sugar rose to a 4-1/2 month peak underpinned by port congestion in key exporter Brazil and strong near-term demand.
"Port authorities in Brazil are saying the list of ships waiting to load sugar is growing, so trying to judge when this blockage story is over is very much a moving target," Thomas Kujawa at Sucden Financial said. The congestion is exacerbating tight nearby supplies, as importers need to replenish stocks after delaying purchases earlier in the year, when raw sugar prices peaked at over 30 cents a lb in February.
"I think we're seeing a bottleneck at the start of the season but once it is cleared I would expect the market to tumble again," Ofon of Standard Chartered said. Pakistan's state-run trading corporation (TCP) awarded an import contract for 320,000 tonnes of white sugar to Singapore's Agrocorp International Limited and Dubai's Sucden Middle East on Monday.
A return to a surplus in the sugar market in 2010/11 may prove illusory, with unprecedented levels of demand for supplies from top exporter Brazil, sugar group Czarnikow said. Patchy rains and sun in most of Ivory Coast's cocoa growing regions last week helped development of this season's last pods, but more sun was needed to slow disease and maximise the start of the next season in October, farmers and analysts said on Monday.
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