Coffee, cocoa and sugar prices eased on Monday as a strong dollar and sharp setback in crude oil prompted broad-based declines in commodity markets. Some dealers said the significance of the move was lessened by the closure of US markets for Labour Day and were waiting to see if the setback was confirmed on Tuesday.
Robusta coffee futures led the way lower with November ending down $89, or almost 4 percent, at $2,247 a tonne. US crude oil futures tumbled around 4 percent to trade below $111 a barrel amid expectations Hurricane Gustav would be less damaging than feared. Diapason fund manager Romain Lathiere said the stronger dollar and weak oil put pressure on soft commodities but added a clearer picture would emerge on Tuesday when US traders returned to their desks and hurricane damage could be assessed.
"I will wait until tomorrow to see exactly what is happening on commodities for this new month. Nearly everything is closed today," he said. Dealers said the robusta market remained within its current range of $2,200 to $2,400 a tonne, basis November. Cocoa futures were also lower, with profit-taking after the rise in prices over the last couple of weeks contributing to the market's weakness.
December cocoa closed down 36 pounds at 1,618 pounds a tonne. The contract rose to a peak of 1,672 pounds last week, its highest level since early July. Dealers said the market was closely monitoring crop progress in top producer Ivory Coast with wet weather sparking some concerns about possible disease and quality issues. There was talk late last week, however, that independent analyst Hans Kilian had raised output estimates for Ivory Coast.
"Quality concerns are definitely there but most people are looking for something pretty chunky," one dealer said. Dealers said the market was also starting to focus on the upcoming election in Ivory Coast. Ivory Coast's President Laurent Gbagbo was named as his party's candidate for November elections at a meeting on Saturday that pointed to an escalation of rhetoric in the run-up to the long-delayed post-war vote.
White sugar futures rose early but saw gains erased as crude oil turned sharply lower. October whites ended off $1.00 a tonne at $397.00 a tonne, well below its early peak of $404.50. Dealers said the market drew some support early pm from the strength in crude oil prices and a reversal in that market helped to trim gains in sugar. October slipped to parity with December after trading at a small premium on Friday.
Dealers said whites remained, however, much tighter than raws with October raws on ICE at a huge and widening discount of nearly 1.80 cents to March. "I think it (October raws discount) can go wider. If the switch in New York gets to 2.00 to 2.50 cents I think you might find receivers," one dealers said, adding there was talk that Argentine sugar, for which there is little demand, would be delivered against the New York contract.
Dealers were awaiting reports about whether Hurricane Gustav had done any damage to sugar crops in countries such as Cuba. "The rain involved can be useful (for sugar crops) if the cane doesn't get flattened for too long," one dealer said. Brazil's total ethanol output might triple by 2020, a senior Brazilian sugar cane industry official said on Monday, adding that ethanol exports jumped 20 percent in the first half of 2008 versus a year ago.