Arabica coffee futures dropped to their lowest level in two years on Tuesday as ample supplies and risk aversion stemming from the euro zone debt crisis kept the market on the defensive. Cocoa futures surged to a strong close and raw sugar futures weakened, although the nearby premium on the latter widened as rainfall disrupted the harvest in top producer Brazil.
September arabica coffee futures on ICE fell 1.35 cents to finish at $1.5535 per lb, having dropped to $1.548, the lowest for the benchmark second month since mid-June 2010. Robusta futures on Liffe eased marginally, with September down a measly $1 to end at $2,070 per tonne.
"It looks so tired and so weak," Sterling Smith, vice president of commodity research for Citibank's Institutional Client Group in Chicago, said of the arabica market. Kona Haque, a soft commodities analyst with Macquarie Bank in London, said: "The pace of harvesting (in Brazil) is going to accelerate. Short-term, there will be selling."
Coffee is vulnerable to the stifling macro environment unleashed by the euro zone crisis and slower growth in the United States and China - the top drivers of the global economy. ICE arabica coffee has been among the worst-performing commodity markets in 2012, with prices down around one-third so far this year. In the robusta sector, thin coffee stocks in Vietnam have been keeping prices high, making it difficult for exporters to secure beans for fresh deals.
Coffee buyers have already switched to taking beans from Indonesia's peaking harvest. Raw sugar futures on ICE declined, although nearby premiums widened as the focus remained on diminished crop prospects in Brazil and delays to exports. July raw sugar futures declined 0.11 cent to close at 20.36 cents per lb. London August white sugar fell $7.20, or 1.2 percent, to settle at $580.30 per tonne.
July's premium to October widened to more than 0.50 cent at one stage before slipping back to around 0.42 cent, up from around 0.30 cent at the close on Monday. ICE September cocoa futures rose $53, or 2.4 percent, to finish at $2,231 a tonne after peaking at $2,255. Liffe September cocoa futures climbed 25 pounds, or over 1.5 percent, to end at 1,538 pounds per tonne.
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