Cocoa futures on ICE tumbled the most in more than two months on Wednesday on chart-based selling and the expectation chocolate demand may fall after Hershey Co hiked its prices. Arabica coffee on ICE Futures US consolidated higher after dropping to a five-month low in the previous session, while sugar was mostly lower with dealers expecting a moderate delivery against expiry of a Liffe white sugar contract.
Cocoa on ICE fell in heavy volume after dropping below a trendline at $3,087 per tonne, basis September. "That really opened up the flood gates," one US dealer said. "The Hershey price increase might act as a negative because it can cut demand." Hershey raised its chocolate prices by about 8 percent post-market on Tuesday, marking their first hike in three years and a sign that a year-long soaring cocoa market was eating into confectioners' profits. ICE second-month cocoa settled down $44, or 1.4 percent, at $3,062 per tonne, its biggest drop since May 1. Liffe September cocoa closed down 18 pounds, or 0.9 percent, at 1,912 pounds a tonne. The July contract, due to expire on Wednesday, is expected to see a small delivery.
The market shrugged off news that top grower Ivory Coast had already auctioned off 80 percent of its anticipated 2014-15 cocoa crop by early July. Benchmark September arabica coffee futures on ICE rose 0.55 cent, or 0.3 percent, to finish at $1.6250 per lb, having fallen on Tuesday to $1.5925, their lowest since February 19.
Dealers said uncertainty over the impact of drought on arabica crops in Brazil continued to feed price volatility. Meanwhile, Peru, a large arabica producer, will likely produce 4 percent less than last year's fungus-hit harvest, the Andean country's agriculture ministry said late Tuesday, reversing earlier estimates showing a recovery. Liffe September robusta coffee eased $13, or 0.6 percent, to $2,009 a tonne. ICE October raw sugar futures fell 0.14 cent, or 0.8 percent, to close at 17.07 cents per lb. Liffe August white sugar ended up 50 cents, or 0.1 percent, at $450.20 per tonne as the contract expired. The rest of the white sugar contracts closed lower.
A moderate delivery of white sugar, likely to come from Central America, Thailand and Brazil, is expected at expiry of the Liffe August futures contract on Wednesday, dealers said. One senior London-based sugar futures broker estimated around 200,000 tonnes will be delivered. Official Liffe delivery data is due for release on Thursday.
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