White sugar futures fell sharply on Wednesday, well below Monday's contract high, driven by a stronger dollar, while raw sugar and coffee futures corrected down from recent peaks. September cocoa futures on ICE completely turned around from earlier losses to hit the highest level in nearly two months prompted by arbitrage buying, dealers said.
In sugar, August whites in London were down $12.10 at $439.90 per tonne at 1605 GMT, having hit a contract high on Monday of $457.00 per tonne, the strongest for the front month since July 2006. Raw sugar futures were down 0.44 cent at 15.00 cents per lb, having hit a low of 14.81 cents per lb earlier.
Dealers said the drop in raw sugar prices to the lower end of a 15-16 cents range may lead to a pick-up in demand in the physical market. "It is to be hoped that now that futures prices have dropped sharply, the physical market will become more active and tempt some of the final buyers back in," Sucden Financial said in a report on Wednesday.
Earlier this week, Pakistan backed away from importing sugar when the state-run Trading Corporation of Pakistan (TCP) cancelled a tender to import 50,000 tonnes of sugar. A London sugar broker said: "It's long liquidation. We've been sellers for producers. "The 14.73 cents level is the next target. The market had tried to get back up to 16 cents, but struggled. We were expecting a sell-off."
London cocoa swung from losses to gains in afternoon trade, boosted by the weakening pound. "It (London market) was under downward pressure for most of the morning from Ghana trying to sell back months," a cocoa trader said. "The release of that pressure and the pound turning around (weakening) seems to have prompted some good buying either by specs, or maybe even some small fund buying," he said.
"It's prompted people to trade the premium between the London and New York markets." September cocoa futures on ICE were up $26 at $2,723 a tonne, having earlier gone up to $2,775, the highest level for the second month since April 6. London September cocoa futures were up 44 pounds to 1,742 pounds per tonne.
Coffee futures slid with sugar, pressured by the stronger dollar, dealers said. July arabica futures on ICE were down 3.95 cents at $1.3805 per lb after jumping to $1.4290 per lb on Tuesday, the highest level for the front month since September 2008. July robusta coffee futures in London were down $13 at $1,535 per tonne in modest volume of 2,265 lots.
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