Sugar, cocoa and coffee prices all fell on Monday, swept lower in a broad-based decline in commodity markets as the dollar rose and fears of a deepening global economic downturn heightened. "We have dollar strength and also got a continuation of the fund rebalancing which is obviously hitting the market," one sugar dealer said.
Index funds have been undertaking an annual rebalancing of positions during the last few days, triggering some selling in ICE raw sugar. March raw sugar on ICE was off 0.33 cent at 11.72 cents a lb at 1613 GMT. "The problem is it hasn't been able to hold 12 cents and a few specs have been selling it short expecting it to go down to 11.50 cents," one dealer said. March whites in London was off $10.50 at $328.60 a tonne.
Cocoa futures were easier but well above the day's lows. May cocoa in London was down four pounds at 1,760 pounds a tonne after earlier touching 1,696 pounds, its lowest level since mid-December. "We broke the lows today and there was some system fund selling but we quickly rallied back again," one London dealer said. The market remained underpinned by concern about slow port arrivals in top producer Ivory Coast while the weakness of sterling also provided some support in London.
Cocoa arrivals at ports in top grower Ivory Coast were 531,000 tonnes from October 1 to January 11, compared with 835,139 tonnes received in the same period in the 2007/08 season, exporters estimated on Monday. March cocoa futures on ICE were off $52 at $2,533 a tonne but stood well above an earlier one-month low of $2,450. Coffee futures also fell in a modest setback after last week's strong advance.
Dealers said the market was, however, underpinned by expectations of a tighter supply outlook in 2009/10. March arabica coffee on ICE stood 1.10 cents lower at $1.1580 per lb. The contract rose sharply last week, peaking at $1.1950 on Friday, its highest level since mid-November and up about 17 percent from a contract low of $1.0215 set in early December.
"A lot of it has been an expectation for a lower 2009/10 production, especially from Brazil," Barclays Capital analyst Sudakshina Unnikrishnan said. A cyclical dip in Brazilian coffee production is anticipated in 2009/10. Robusta coffee futures eased as the dollar strengthened with March off $29 at $1,671 a tonne.