Coffee and sugar futures fell on investment fund liquidation and origin selling on Tuesday after the US Congress rejected a $700-billion plan to bail out Wall Street banks. Robusta coffee futures fell to the lowest level in more than eight months as turmoil in global financial markets and a strong dollar continued to drive prices lower.
November robustas in London were down $22 at $1,998 a tonne at 1050 GMT after touching $1,980, the lowest level for the benchmark second month since January 22. "London having broken the $2,000 level is quite significant. I believe it will bring more system fund selling into London," one coffee dealer said.
December arabicas on ICE also breached the key $1.30 a lb level before a rebound in the crude oil market helped spark a modest rally in coffee. The front month was up 0.65 cents at $1.3090 a lb at 1050 GMT. The failure to hold key levels led some to expect further chart-based selling in both markets.
"There's a lot of nervousness and fear around," said trader Nick Hungate of Rabobank. Another dealer said: "It is looking nasty in both markets. I think they should both go lower from here." The global economic crisis has led to broad-based selling in commodity markets and should keep coffee on the defensive, dealers said.
"I don't think we are at the end of these financial issues so I think it will bring everything down with it," one dealer said. Dealers said the drop in prices had dried up selling interest from Vietnamese robusta producers but there had been Brazilian selling of arabicas, triggered partly by the weakness of the real against the dollar.
Coffee prices in Vietnam were stable in the past week but thinning stock slowed trade while heavy rains from a tropical storm have not hurt coffee crops in coffee belt Central Highland region, dealers said. In sugar, attention focused on expiry of the spot raw October contract on Tuesday, and dealers squared positions ahead of the end of the third quarter.
ICE March pared early losses to stand at 13.85 cents a lb, down 0.04 cent or 0.29 percent at 1048 GMT after oil rebounded. London December white sugar futures were down $3.8 or one percent to $383.70 per tonne. Cocoa futures were little changed as traders monitored the start of main crop harvesting in leading West African producers. They are monitoring the impact of black pod and swollen shoot virus on production in Ivory Coast, the world's top cocoa grower.
ICE December cocoa was up $14 or 0.55 percent to stand at $2,571 per tonne at 1043 GMT, while London March was down 2 pounds or 0.13 percent to 1,490 pounds per tonne in slim turnover of 1,604 lots. US cocoa took a heavy hit from long liquidation on Monday, closing down nearly 7 percent but falling further in late-day dealings after the financial rescue bill was rejected.
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