A resurgent dollar and easing oil prices triggered fund and investor selling of London robusta coffee and white sugar futures on Wednesday, while cocoa edged higher, led by fund buying in the US market. Benchmark July robusta coffee futures fell more than 2.5 percent to close at $2,294 a tonne, down $61 in brisk volume of 12,072 lots.
"The dollar is the only explanation we can find today for the shifts in soft commodities," said Romain Lathiere, fund manager at Diapason Commodities Management. The euro retreated from a record versus the dollar on Wednesday after a fall in manufacturing activity suggested that economic growth in the eurozone is starting to slow. A fall in oil prices also dragged on the soft commodity complex, triggering profit-taking after a run-up on Tuesday.
"For several weeks crude oil has been a leading indicator for the (soft) commodity markets," Lathiere said. White sugar futures fell in sympathy with raw sugar, pummelled by the stronger dollar and weakening oil prices, dealers said. August white sugar futures closed down $7.00 to $357.00 a tonne in reasonable volume of 2,508 lots.
Some investors see a linkage between oil and sugar prices because of the use of cane-derived ethanol as biofuel. More expensive crude oil increases the appeal of sustainable alternative fuels such as ethanol.
Soaring food prices are a "massacre" of the world's poor and are creating a global nutritional crisis, Venezuelan President Hugo Chavez said on Tuesday, calling it a sign that capitalism is in decline. The heated global food-versus-fuel debate has changed the way the Inter-American Development Bank (IDB) evaluates financing of biofuel projects that could siphon off staples like corn or soybeans, a senior official said on Tuesday.
Brazilian sugar and ethanol producer Cosan said on Tuesday its common shares would remain listed on the Sao Paulo Stock Exchange after it failed to convince enough shareholders to swap their shares for stock in holding company Cosan Ltd. London cocoa futures edged higher on the coat-tails of US futures, driven up by fund buying, and dealers talked of arbitrage activity between the two markets.
July cocoa finished up 10 pounds at 1,507 pounds a tonne in reasonable volume of 2,652 lots. Cocoa farm-gate prices in Ivory Coast's main growing zones mainly rose from April 14 to 20, with farmers reluctant to sell beans for less than a new guideline price of 500 CFA francs (US $1.21) per kg in some regions.
Cocoa arrivals at ports in top producer Ivory Coast reached around 1,076,000 tonnes from October 1 to April 20, exporters estimated on Tuesday, but they expressed concerns over the quality of beans received as the mid-crop harvest picked up.
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