March white sugar in London settled $3.20 lower at $663.00 a tonne after setting a record peak for the front month of $680.70. Reversal sparked by strengthening dollar but market underpinned by nearby supply tightness. London March robusta coffee ended $20 lower at $1,386 a tonne, also weighed by a firmer dollar which sparked broad-based losses in commodity markets.
May cocoa in London ended 4 pounds lower at 2,322 pounds a tonne after peaking at 2,350 pounds, the highest level for the benchmark second month in 32 years. Weakness in ICE cocoa, partly driven by a stronger dollar, helped to drag the London market lower.
In early trade white sugar futures set a record peak and London cocoa climbed to its highest in 32 years on Thursday with investor appetite for both commodities fed by supply concerns that have created global deficits. While wider commodity markets have benefited this year from dollar weakness against major currency rivals, soft commodities have the added impetus of a classic supply-induced rally that has seen sugar prices alone more than double.
Rains in Brazil have shrunk the size of the crop in the world's leading producer and exporter of sugar at a time of strong demand from India while cocoa faces the prospect of a fourth consecutive global supply shortfall in 2009/10. "We know there will be a global deficit (in sugar) next year so the fundamentals are very, very bullish," said Romain Lathiere, fund manager with Diapason Commodities Management.
Earlier this week, Brazil's crop supply agency Conab said persistent rains since July had cut Brazil's 2009/10 sugar output to 34.6 million tonnes from 36.7 million seen in September. The International Cocoa Organisation (ICCO) earlier this month estimated stocks at the end of the 2008/09 season at 1.56 million tonnes compared with just 274,000 tonnes 32 years earlier. The stocks to grinding ratio was also a healthier 44.4 percent versus an all-time low of 19.1 percent in 1976/77.