ICE raw sugar futures eased off the previous session's four-month high on Tuesday, as fund buying supported the market, while dealers focused on the imminent expiry of the spot month. Cocoa was higher as dealers noted a pick-up in fund interest across the softs, while arabica coffee eased.
Sugar inched lower, digesting recent gains, after March raw sugar hit a four-month high of 26.78 cents per pound the previous session. "For the time being it looks as though sugar is slightly overbought and having a little bit of a correction," said a London-based trader.
March raw sugar on ICE fell 0.15 cent or 0.6 percent to 26.35 cents a lb at 1524 GMT. "The market has gone up a lot on fund inflows, and the funds seem to be still buying," said Jonathan Kingsman, managing director of Lausanne-based sugar and ethanol consultancy Kingsman SA.
Dealers monitored the front-month premium on March raw sugar with the contract due to expire on Wednesday. Cargill is expected to be a big receiver of up to 1 million tonnes of raw sugar at expiry on Wednesday of the ICE spot contract, based on the current value of the front-month spread.
Dealers said they expected the market to initially correct lower following the March expiry, but that there was potential for the May premium over July to strengthen as there remains a limited amount of sugar available for delivery against May, particularly with the timing of Ramadan which will boost demand.
"The expiry of May is likely to be very similar to March. If somebody takes a large amount from March then that sugar is no longer available for May and there's no more supply coming from Brazil because the crop starts in May/June and is available for the July expiry," said a trader.
London May white sugar futures fell $8.80 or 1.3 percent to $662.30 per tonne. Cocoa futures on ICE were higher as West Africa entered a seasonal lull in exports between its main crop and mid crop, with May up $16 or 0.7 percent at $2,416 a tonne. Liffe May cocoa futures were up 14 pounds at 1,556 pounds a tonne, with the March and May contracts trading at similar levels ahead of the March options expiry on Wednesday.
"There's a big options expiry tomorrow, which is keeping people on their toes with a lot of calls above the market," said a European analyst. "There seems to be a feeling that once the expiry is out of the way, prices will come down a bit because there's still a lot of origin selling from Ivory Coast now they've got the auctions sorted out and also from Ghana." Benchmark Liffe May futures were $1 or 0.05 percent higher at $2,013 a tonne.
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