Coffee futures sank in volatile trade on Monday as technical weakness and uncertainty over the extent of drought damage in top grower Brazil kept speculators and producers selling. Cocoa futures in New York and London traded mixed, while raw sugar fell as traders continued to cash in on a rally and hefty global supplies weighed.
Benchmark July arabica coffee futures on ICE Futures US dropped 5.15 cents, or 2.9 percent, to end at $1.7235 per lb and close below its 100-day moving average of $1.7408. Prices were under pressure from selling on both bearish chart signals and uncertainty over whether drought earlier this year has hurt crops as much as many anticipated.
Volcafe, one of the world's biggest coffee merchants, left its 2014/15 Brazil crop outlook at 45.5 million 60-kg bags in a May quarterly report seen by Reuters on Monday. Global coffee trader Mercon Group said in a report that Brazil's production would be 50.5 million 60-kg bags, the higher end of a wide range of divergent forecasts that has kept coffee traders on edge. "What's killing prices is the speculator community keeps pulling long positions. They're afraid to hold onto them," said Hector Galvan, a senior softs broker at RJO Futures in Chicago.
July robusta coffee futures dipped $4, or 0.2 percent, to settle at $1,933 per tonne. In cocoa, New York futures moved sideways in swaps-related dealings but remained underpinned by expectations of a global deficit and concerns over weather and prospects for West African main crops. The benchmark ICE July cocoa contract closed down $2, or 0.07 percent, at $3,069 per tonne, hovering below Friday's high of $3,082, the strongest level since 2011.
The ICE second-month September contract closed up $2, or 0.07 percent, at $3,072 after hitting a 33-month peak of $3,080. Liffe September cocoa ended unchanged at 1,932 pounds per tonne. "There are concerns that weather, possibly El Nino, could cause some problems to output," said one London-based cocoa futures broker.
Even so, expectations are mounting that a global supply deficit will be lower than previously forecast. Arrivals at ports in top grower Ivory Coast reached around 1,467,000 tonnes by June 1 since the start of the season on October 2, exporters estimated. ICE July raw sugar slid 0.20 cent, or 1.2 percent, to settle at 17.18 cents a lb, dropping toward the one-month low of 16.95 cents a lb set last week as speculators exited and excess supplies continued to wash over the market.
Speculators cut their bullish position in raw sugar contracts in the week ended May 27 from a six-month high, weekly US government data showed on Friday. Spread-related gyrations indicate oversupply, and "whites market and whites premium are not encouraging the bulls," said Nick Penney, a senior trader with broker Sucden Financial. Liffe August white sugar futures closed down $3.40, or 0.7 percent, at $467.50 per tonne.
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