Sugar, cocoa and coffee slide in London

Sugar, cocoa and coffee futures fell with global financial markets and oil on Thursday, pressured by a firm dollar after European rate cuts, and dealers said they feared more volatility ahead. "Its dollar strength and macroeconomic jitters," Nick Hungate, soft commodities trader with Rabobank, said. "There is huge volatility at the moment."
Dealers said market fundamentals in soft commodities were of minor concern as outside markets drove sentiment. Investor selling dragged down benchmark May raw sugar below the key support level of 13.00 cents per lb. "If May cannot hold 13.00 cents per lb, the market will struggle and recent lows should be a target," UK broker Sucden said in a daily market report.
Fortis Commodity Derivatives said in a report: "Outside markets appear to be the short-term directional drivers for sugar, and banana skins lie ahead today." ICE May was down 0.45 cent at 12.81 cents per lb at 1750 GMT, while London May settled $9.20 lower at $381.50 per tonne. Dealers saw key support in ICE May at 12.50 cents.
Cocoa joined the slide across the soft commodities spectrum, with weakening demand linked to the economic downturn also weighing on the market. London May cocoa ended 41 pounds or 2.2 percent lower at 1,756 pounds per tonne, while ICE May cocoa settled $73 or 3.1 percent weaker at $2,265 per tonne. "The cocoa market will return to surplus in 2009/10. That together with weaker demand for chocolate confectionery, particularly in the developing world, suggests that prices will fall," the Economist Intelligence Unit said in a report.
Barry Callebaut, the worlds largest chocolate maker, has reduced cocoa grinding at its Wieze factory in Belgium to five days a week from seven, the companys head of operation and supply chain organisation said. The company cited lower demand and the companys additional grinding capacity in top producer Ivory Coast. Dealers said losses in London were limited by the weakness of the pound following a cut in UK interest rates.
Robusta coffee futures slipped on Far Eastern origin and investor selling, while arabicas dropped on investor sales, pressured by the firmer dollar, dealers said. "There has been origin selling on robustas, and in arabicas some specs came in (to sell positions)," one dealer said. London May robusta coffee futures finished $17 lower at $1,511 per tonne, while ICE May arabicas were down 0.55 cent at $1.0815 per lb.