Sugar, cocoa and robusta coffee fell along with the commodity complex on Tuesday as doubts over Spain's willingness to seek international aid refocused investors' attention on the euro zone debt crisis, hitting riskier assets including commodities. Arabica coffee turned higher on short-covering after dropping more than 2 percent.
The Thomson Reuters-Jefferies CRB index, a benchmark for commodities, dipped roughly 0.8 percent to a one-week low as oil futures dropped, with investor focus shifting from the likely economic benefit of the US Federal Reserve's third round of bond buying, known as quantitative easing (QE3), to concerns about sputtering global economic growth.
"I think what we're seeing is that the initial support that some of the softs markets got following the announcement of QE3 has petered out at this point," said Sudakshina Unnikrishnan, commodities analyst at Barclays Capital. Raw sugar futures on ICE dropped around 3 percent in heavy volume, under pressure from the weak commodity markets and bearish fundamentals with expected global supply surpluses in both 2011/12 and 2012/13. ICE October raw sugar futures fell 0.59 cent, or 3 percent, to close at 19.44 cents per lb, the lowest one-day tumble since August 21. The contract traded above a two-year low of 18.81 cents touched on September 6. Total volume exceeded 140,000 lots, more than 35 percent above the 30-day average.
"Whenever I see any price weakness, I'm not surprised as the surplus numbers for the coming quarter justify a reduction in prices," said a London-based broker. Supply worries in top producers Brazil and India have eased in recent weeks as weather conditions have improved crop prospects in both countries.
December white sugar on Liffe fell $12.40, or 2.2 percent, to close at $563.30 per tonne. Cocoa futures fell for the second straight day, caught up in the wider commodities selloff, with the focus remaining on top grower Ivory Coast's reforms as the market awaited the publication of the fixed farmer price for the season starting October 1.
"The market had an extended rally and then it just got a little bit overdone on the upside. Now the market is finding some long liquidation rolling in," said one US dealer, referring to the 10-month high reached on September 6. ICE December cocoa fell $52, or 2 percent, to settle at $2,532 per tonne, its lowest close since August 27. "Cocoa fundamentals are still fairly firm (supportive) due to the supply side concerns," said Barclays' Unnikrishnan.
Liffe December cocoa ended down 30 pounds, or 1.8 percent, at 1,633 pounds per tonne. Robusta coffee closed down 1.9 percent, weighed down by the weak market sentiment, though dealers said firm demand should underpin prices in the London market. November robusta coffee futures fell $40 to end at $2,024 a tonne. ICE December arabica coffee futures closed up 1.85 cents, or 1.1 percent, to close at $1.7750 per lb, after trading on both sides of the 100-day moving average at $1.7330. The contract hit a session low at $1.7165 per lb, choppy after last week's short-covering rally that pushed prices up around 10 percent last week.
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