Cocoa and sugar prices eased on Tuesday as a sharp setback in oil and a stronger dollar sparked a widespread decline in commodity markets, dealers said. "Crude oil is driving all the other commodities and you also have an increase in the US dollar," Romain Lathiere, fund manager of Diapason Commodities Management, said.
October raw sugar futures on ICE was off 0.34 cents to 12.14 cents a lb at 1510 GMT after touching 12.07 cents, its lowest level for more than 5 weeks. The contract has fallen sharply after touching 14.35 cents on July 3 with the setback linked to a drop in crude oil prices. Sugar is used to produce biofuel ethanol in Brazil and its prices at times track those of the crude oil market.
"The fundamentals are not very good. We know there is plenty of sugar everywhere," Lathiere said. October whites in London stood $5.90 lower at $353.60 a tonne. Cocoa prices also fell, with a strong dollar weighing on prices in New York.
Dealers said second quarter US grind data issued last week, which showed a larger than expected decline, also reinforced concern about a possible downturn in cocoa demand. "The US grind sends a grim signal," brokers Fortis said in a monthly report issued on Tuesday. Lathiere of Diapason, however, downplayed the impact of the US economic slowdown.
September cocoa futures on ICE fell $21 to $2,804 a tonne, almost exactly in line with an end-2008 forecast for the front month in a Reuters poll on Tuesday of $2,800. September cocoa in London dipped 8 pounds to 1,455 pounds a tonne. Coffee prices were slightly higher with robusta leading the advance.
Dealers said delays to shipments from top robusta producer Vietnam helped to fuel the rise. "We are waiting for shipments from Vietnam and they are a bit late. That is why you have a bit of support on the robustas," Lathiere of Diapason said.
Vietnamese grade two coffee has been trading at a significantly reduced discount to London futures during the last few days, buoyed by a lack of farmer or exporter selling. September arabica coffee on ICE rose 0.25 cents to $1.3755 per lb while September robusta coffee in London climbed $23 to $2,370 a tonne.
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