Cocoa and sugar slumped to multi-month lows on Friday and coffee prices fell, swept lower by a broad-based decline in commodity markets on fears the credit crisis could push the world into recession. "It is a mixture of small speculators, funds and a little bit of origin selling. The feel seems more bearish today," one cocoa dealer said.
Lars Steffensen, managing director of Ebullio Capital Management, said he believed the commodity and financial markets have bottomed out and would soon be ready for a bounce. "Classic bottom formation capitulation," he said. "I think they're all - stock markets and commodities - going to turn around. Now we're going to start trading up. It cannot get any worse."
Dealers said dollar-denominated contracts suffered the steepest losses as the US currency rose to a 14-month peak against a basket of currencies. December cocoa futures on ICE trimmed their losses, and were down $79 or 3.4 percent at $2,251 a tonne at 1455 GMT. The contract touched $2,205 a tonne, the lowest level for the front month since late January. March cocoa in London was down 30 pounds or 2.1 percent at 1,396 pounds a tonne.
"I would say commodities as a whole seem bearish and I don't think cocoa is immune to that feeling," one dealer said. "It is very unpredictable. Most of people are hoping there will be a bit of buying but at the moment it is like tossing a coin," one cocoa dealer said.
Robusta coffee futures in London fell sharply and later trimmed losses, with January down $38 or 2.1 percent, at $1,748 a tonne at 1504 GMT. The market held, however, above January's contract low of $1,642 which was set on Wednesday. "Of course, it is oversold technically, and if you are very brave you start buying it, but we are in such a mess that it could easily go another $50 or $100 lower," one dealer said.
Arabica futures on ICE also trimmed losses, with December down 0.4 cent or 0.35 percent at $1.1425 per lb. Dealers said origin selling had contributed to weakness in both robusta and arabica prices. Guatemala's coffee growers must cut costs and diversify their business to ride out a global economic downturn and plummeting commodity prices, a top coffee official said on Thursday.
Sugar futures fell to the lowest levels in more than three months with a sharp setback in the crude oil market contributing to the downward trend. March raw sugar futures on ICE fell 0.44 cents or 3.7 percent to 11.46 cents a lb after slipping to 11.23 cents, the lowest level for the front month since late June.
Oil fell more than $7 on Friday, dropping below $80 a barrel for the first time in a year, pressured by expectations fuel demand growth will shrivel if the credit crisis pushes the world economy into recession. December whites in London fell $14.50 a tonne to $327.50 a tonne. The contract hit $30.00, the lowest level for the front month since early June.