Robusta coffee futures on Liffe turned lower after surging to the highest level in more than three months on Monday as buying on supply concerns dried up, while raw sugar on ICE consolidated after reaching a three-week high. Arabica coffee futures on ICE fell to a one-month low, dropping along with the commodity complex, while cocoa prices edged lower.
The softs complex was down across the board in heavy volume as the Thomson Reuters-Jefferies CRB index, a global benchmark for commodities made up of 19 markets, was down about 0.6 percent. The complex dropped along with major stock markets as investors booked profits on recent strong gains.
Robusta coffee futures on Liffe jumped for the third straight session, climbing more than 5 percent over three days to the highest levels in more than three months before falling back. May robustas closed down $8, or 0.4 percent, at $2,047 a tonne after peaking at $2,074, the highest level for the second month since October 22, 2012.
"Demand for robusta's very strong," said Shawn Hackett of Hackett Financial Advisors in Florida, adding that some dealers are concerned about future supplies as the world's biggest producer, Vietnam, has put a halt to increasing farm acreage. "Twenty-five percent of the trees are beyond their productive life and we'll have to go through another rejuvenation cycle at a time of constrained acreage," Hackett said.
The market was boosted last week by the rebalancing of the Rogers International Commodity index with Liffe robustas added at the expense of ICE arabicas. The robusta rally narrowed its discount to ICE arabica futures to around 52 cents per lb, the lowest in 1-1/2 months.
March arabica coffee futures on ICE finished down 3.60 cents, or 2.4 percent, at $1.4435 per lb, weighed on partly by a firmer dollar. Total volume surged above 36,000 lots, the highest in two weeks, preliminary Thomson Reuters data showed. Dealers said that based on historical price charts the technical outlook was bearish with potential for further losses.
March raw sugar futures on ICE slid 0.16 cent, or 0.8 percent, to settle at 18.73 cents a lb, an inside session. The front month had dipped to 18.06 cents on January 23, its lowest level since August 2010. Total volume neared 114,000 contracts, up 17 percent from the 250-day average, preliminary Thomson Reuters data showed. Total open interest inched up 686 contracts to 835,969 contracts on February 1, the highest since February 2010.
"It's saying that people are getting interested in sugar again. Money wants to play this market again," Hackett said about the climbing open interest. The market has been on a prolonged downtrend driven by the prospect of a third consecutive global surplus in 2012/13.
"Near term we see the potential for some support returning to sugar despite the headwinds created by the large harvest," Ole Hansen, head of commodity strategy at Saxo Bank, said in a research note on Monday. Speculators cut their net short position in raw sugar contracts on ICE Futures US, in the week to January 29, US Commodity Futures Trading Commission data showed on Friday.
March white sugar on Liffe fell $4.00, or 0.8 percent, to end at $498.50 a tonne. Cocoa futures were lower with March futures on ICE settled down $13, or 0.6 percent, at $2,192 a tonne. Total volume exceeded 34,000 lots, up 55 percent from the 250-day average, preliminary Thomson Reuters data showed. Volumes have been boosted by heavy activity on the March/May spread at around level money. May cocoa on Liffe finished down 10 pounds, or 0.7 percent, at 1,434 pounds a tonne.
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