Cocoa futures fell on Wednesday from the prior day's 23-year peak in London on origin selling and general profit-taking, dealers said. Sugar prices held steady while arabica coffee edged higher on the back of a weaker dollar. "We had a little bit of origin hedging at the opening and that helped to set the tone. I think it is also a bit of a correction from yesterday," one cocoa dealer said.
London May cocoa ended down forty-nine pounds at 1,783 pounds a tonne after an abbreviated pre-holiday session. The contract rose to 1,820 pounds on Tuesday, a 23-year high for the benchmark second month. The market was underpinned by concern about supply tightness as analysts revise down prospects for crops in West Africa.
March cocoa on ICE was down $78 at $2,573 a tonne at 1230 GMT. Soft commodity markets in London will be shut on Thursday and Friday for the Christmas holiday and reopen on Monday. Sugar prices were mostly steady with ICE March raw sugar off 0.01 cent to 10.84 cents per lb. London March white sugar closed $0.70 higher at $308.50 a tonne. Brokers Sucden said index fund rebalancing over the next month is likely to reduce the fund long position and weigh on raw sugar prices.
"This could put both the flat price and the front month spreads under further pressure and could well lead to a test of the 10.00 (cents a lb) area and possibly a quick look at some lower numbers," Sucden said in a daily market report.
"I would expect prices to remain in a 10.00/13.00 range in the first quarter, or maybe slightly longer, but I do feel there will be a strong possibility of higher values as we head into 2010," the report added. The global economic crisis is set to curtail the expansion of the sugar market with many Brazilian mills struggling to repay debts, merchant Czarnikow said this on Wednesday.
Arabica coffee futures on ICE edged higher, supported partly by a weaker dollar while robustas remained little changed as hedge selling helped to keep a lid on the market in thin volume. March robusta futures ended $2 higher at $1,579 a tonne while March arabica futures rose 0.60 cents to $1.0805 per lb.
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