Sugar futures on ICE fell on Wednesday after the exchange reported a larger-than-expected delivery on the May contract a day after it expired, while cocoa jumped to the highest since December on signs there could be less available beans in the near future. Coffee futures fell, with the ICE arabica flirting with a three-year low, weighed by a big off-year crop in top grower Brazil.
With the exception of cocoa futures trading on ICE Futures US, trading volumes across the softs markets due to May Day holidays in a number of countries. July raw sugar futures closed down 0.27 cent, or 1.5 percent, at 17.33 cents a lb, holding above 17.13 cents, the lowest level for the front month since July 2010 reached on Monday.
"We continue to expect rallies to be short lived and over the medium term to expect lower levels and a test of 17 cents," said Thomas Kujawa of brokerage Sucden Financial. Many traders were surprised by a massive delivery against expiry on Tuesday of the ICE May raw sugar futures contract, far bigger than expected and the biggest on record for ICE, whose data extends as far back as 1989. Some traders believed it to be a record high. ICE May sugar delivery totalled 1.43 million tonnes, or 28,210 lots, according to the exchange. There were three receivers of the delivery, and origins were Brazil and Costa Rica.
The huge delivery may be a reflection of higher-than-expected availability of Brazilian sugar after favourable harvest weather in the main centre-south growing region in recent weeks, dealers said. Top grower Brazil's centre-south sugar cane crop is expected to see record output this season. Sugar prices have slowly ground lower from a peak of 36.08 cents in February 2011 as successive bumper harvests from Brazil contributed to consecutive global surpluses. August white sugar on Liffe settled down $5.00, or 1 percent, at $500.10 a tonne.
Cocoa futures on both ICE and Liffe soared, after cocoa exports in Indonesia's main growing island Sulawesi dropped by 27 percent in April and purchases in the world's second biggest grower Ghana were down 14 percent this season so far, year over year. July cocoa on ICE rose to touch a four-month high of $2,420 per tonne before losing a little ground to close up $47, or 2 percent, at $2,415. Total volume was heavy above 28,500 lots by 1:55 pm EDT (1755 GMT), up 30 percent from the 250-day average for the full session, preliminary Thomson Reuters data showed.
Technical buying also lifted the market, as the benchmark contract jumped above its 200-day moving average and broke through resistance at its 50 percent Fibonacci retracement level. "There's a lack of hedging with many players away for the May Day holiday," a London-based cocoa futures dealer said. July cocoa on Liffe closed up 25 pounds, or 1.6 percent, at 1,566 pounds a tonne. The contract also climbed above its 200-day moving average but held just shy of its 50 percent retracement level.
ICE July arabica coffee futures fell but held above Monday's three-year low, finishing down 0.40 cent, or 0.3 percent, at $1.3470 per lb. The contract dipped to $1.3270 on Monday, the lowest level for the second month since May 2010. July robusta coffee futures on Liffe closed down $8, or 0.4 percent, at $1,999 a tonne in light turnover of 4,746 lots.
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