Raw sugar futures on ICE turned lower on Wednesday as a short-lived rally linked to India's importation of sugar for the first time in two years ran out of steam and the market's focus turned to the prospect of a large delivery. Robusta coffee futures fell after hitting a six-week high while arabica coffee and cocoa markets also dropped as a strong dollar and broad-based weakness in financial markets put commodities on the defensive.
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, dropped roughly 1.3 percent to the lowest since August 20 at 302.59. Sugar futures fell for the first time in five sessions, with the focus on expectations for a potentially large delivery when the October contract expires at the end of the week.
Although the session's tumble caused the spot contract's discount to narrow slightly, it remained large. On Monday, the discount widened to 0.86 cent per lb, matching a three-year high reached earlier this month. "With the switch at a discount, as wide a discount as it is, that means the market hasn't found a better buyer anywhere," one New York dealer said.
October raw sugar on ICE eased 0.29 cent, or 1.5 percent, to settle at 19.57 cents a lb. Most-active March ended down 0.34 cent, or 1.6 percent, at 20.38 cents per lb. Sugar firmed briefly after news that Indian mills had signed deals to buy up to 450,000 tonnes of Brazilian raw sugar for delivery from October to December as a gap between domestic and overseas prices widens, making room for the first imports in more than two years.
"The bigger picture remains unchanged. For the next six months or so it appears the market will be in good surplus," said analyst Muktadir Ur Rahman of Capital Economics, adding global economic concerns may also weigh on prices.
"When India becomes a net importer of sugar it does have an impact on the sugar price. However, I don't think based on the domestic production scenario, that India is going to be a net importer of sugar in 2012/13," Rahman said. One of Brazil's largest sugar-milling groups, Copersucar, said on Tuesday that farmers may have to leave some cane standing in the fields until next harvest.
December white sugar on Liffe fell $5.80, or 1 percent, to close at $570.30 per tonne. Cocoa futures were down a shade as the market took a breather after falling 10 percent from a 10-month high reached in early September. Weak demand remains a concern with third-quarter European grind data, to be issued in mid-October, expected to show a year-on-year decline of up to 20 percent.
ICE December cocoa closed down $14, or 0.6 percent, at $2,469 per tonne. The weakness of sterling against the dollar helped to underpin prices on Liffe, where December eased 1 pound to finish at 1,597 pounds a tonne. Coffee futures weakened. ICE December arabica coffee futures settled down 4.20 cents, or 2.4 percent, at $1.6945 per lb. November robusta coffee futures on Liffe ended down just $14, or 0.7 percent, at $2,130 a tonne, after hitting a six-week high at $2,150.
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