Cocoa futures fell on Monday, as technical selling resulted in the market's sharpest three-session drop in more than a year, while ICE sugar futures inched higher in heavy trading. Liffe robusta coffee steadied after recovering from its lowest price since October 2010 while arabica trading on ICE Futures US turned down a shade, recovering from last week's low, its lowest in more than three years.
Cocoa futures on both Liffe and ICE dropped for the third straight day, their biggest such slump since March 2012, as speculators kept liquidating long positions. Selling was spurred by top grower Ivory Coast's offer of a temporary refund on mid-crop cocoa to stimulate purchasing that has been hampered by small bean size late last week.
"The sense here is it's going to lead to more exports in the market ... and also increase hedge flow," one veteran US cocoa dealer said. "Even if it doesn't lead to more exports due to cocoa staying in-country for processing ... guys are going to have to put their hedges in place in the market." The drop pushed the markets below key short-term and long-term moving averages, spurring follow-through technical selling, dealers said. September cocoa on Liffe fell 22 pounds, or 1.5 percent, to settle at 1,452 pounds a tonne, the second position's weakest finish since April 5. September cocoa futures on ICE dropped $38, or 1.7 percent, to end at $2,215 a tonne, the lowest settlement for the second position since May 31.
Favourable weather and supply prospects in West Africa also weighed on the markets, dealers said. July raw sugar on ICE finished up 0.15 cent, or 0.9 percent, at 16.93 cents per lb. The contract had fallen to 16.17 cents on Thursday, the lowest for the front month since July 2010, and then surged to as high as 16.80 cents on Friday.
"Producers have been waiting for such a move and are likely to sell into it, especially Brazilian producers who are benefiting from the weakness of the real/USD," said Nick Penney of broker Sucden Financial Sugar. A soft Brazilian currency boosts local incomes from the sale of dollar-denominated commodities such as sugar and coffee. Huge new-crop supplies from Brazil and Mexico are keeping a lid on sugar prices. Heavy July/October and October/March spreading boosted total volume above 250,000 lots, more than 2.5 times the 250-day average, the biggest daily volume in a year, preliminary Thomson Reuters and ICE data showed.
Speculators increased bearish bets in sugar and arabica coffee futures and options on ICE Futures US in the week to June 11 to their highest since April, US Commodity Futures Trading Commission data showed on Friday. August white sugar on Liffe closed up $7.60, or 1.6 percent, at $492.00 a tonne, having hit resistance at $500.
September robusta coffee futures on Liffe settled flat at $1,764 a tonne after dropping on Friday to $1,704, their lowest since October 2010. Plentiful Vietnamese supplies have pressured prices. "There is little room for London to come down further," said Ricardo Santos, a senior coffee trader at Equatorial Traders. September arabica coffee futures on ICE finished down 0.55 cent, or 0..4 percent, at $1.2325 per lb The contract fell to $1.2280 per lb on June 12, the lowest level for the second month since September 2009, driven down by plentiful supplies of off-year coffee from top grower Brazil.
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