Cocoa futures on ICE fell to the lowest levels in more than two months on Tuesday as technically driven selling overwhelmed support provided by the deepening conflict in top grower Ivory Coast. Arabica coffee futures also retreated further from a 34-year high set earlier this month, but raw sugar futures rose as the market eyed the outlook for the harvest in top producer Brazil.
Cocoa prices on Liffe also tumbled, with July sliding to a low of 2,025 pounds before edging back up to 2,044 pounds, still down 69 pounds on the day. May cocoa on ICE fell to $3,091 a tonne, its lowest level since January 19, before recovering slightly to $3,116 by 1426 GMT, still down $132 or 4.1 percent on the day. "We expect prices to remain high and volatile until political stability returns to Ivory Coast," Goldman Sachs said in a report on Tuesday.
"However, if the situation normalises, we believe that prices will likely decline strongly given this year's large West African production, which points to a market in surplus for the 2010/11 crop year," the report added. ABN AMRO/VM Group on Tuesday maintained its forecast of a small global cocoa surplus in 2010/11 of 28,000 tonnes following a deficit of 107,000 tonnes in 2009/10.
"Given how high and fast arabica (coffee) has risen, it's understandable that some investors will seek to take profits and shield themselves from a possible price collapse," ABN AMRO/VM Group said in a report on Tuesday. "But in terms of supply-demand fundamentals, it may well be premature to call time on this bull run," the report said. May arabica coffee on ICE stood 1.95 cents or 0.7 percent lower at $2.62 per lb. The contract has fallen about 12 percent after peaking at $2.9665 on March 9.
Robusta coffee prices also eased as the premium on the May contract stimulated shipping activity from top robusta producer Vietnam. May robustas on Liffe eased $26 or 1.0 percent to $2,535 a tonne. "Certified stocks are certainly going to balloon", as those caught short of the market scramble to ship coffee from Vietnam to Europe for grading, a London-based broker said.
May robusta's premium to July eased to around $137 a tonne from around $145-$160 on Monday, although it remained below its peak of more than $200 made last week. Raw sugar futures rose as dealerMay raw sugar on ICE rose 0.35 cent or 1.3 percent to 27.40 cents a lb, while May whites on Liffe edged $2.90 higher to $704.50 per tonne.