Liffe November robusta coffee settled $49 lower at $1,591 per tonne on continued fund selling. Dealers said system funds liquidated about 25 percent of their long positions in the market on Tuesday and continued selling in lighter volumes on Wednesday.
Liffe October white sugar futures ended $17 higher at $586.90 per tonne. Low raw sugar stocks at refineries are supporting the white sugar premium. Liffe December cocoa ended 38 pounds lower at 1,967 pounds a tonne. Dealers noted market sentiment had turned bearish in recent weeks on improving West African crop prospects.
"System funds have steadily been building up long positions in coffee and yesterday they liquidated about 25 percent of them," a London-based broker said. "There's more liquidation today but not in the same volumes." Dealers said roaster buying was providing some support after a fund-driven decline on Tuesday saw both robusta and arabica values fall by about 8 percent.
"The roasters need to fix (on ICE) and when the market drops like that they are going to be all over it like a rash," a London-based broker said. "Several of the underlying elements that took the sugar market to 30 cents a lb earlier this year have not changed: the low stock environment, high domestic prices around the world, limited new global expansion in production and continued consumption growth," Desmond Monteith, portfolio manager of the commodities firm Armajaro's CZAR + Fund said.
Congestion at Brazilian ports remained supportive of prices, exacerbated by strong nearby demand. "Currently, many refineries are running on critically low raw sugar feedstock resulting in long queues at Brazilian ports as well as lending support to the white sugar premium," Monteith said. "Looking ahead, the tradable raw sugar dynamics point to a substantial raw sugar deficit in the first half of 2011."
The International Sugar Organisation forecast on Wednesday there would be a global sugar surplus of 3.22 million tonnes in 2010/11 (October/September) compared with a deficit of 4.95 million in the prior season. Dealers said the world cocoa market is expected to return to surplus in 2010/11, after several years of deficit, with estimates ranging from a 50,000 tonne to 200,000 tonne surplus. "Funds have been putting some seriously bearish bets on the market in recent weeks," the London-based broker said.
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