Cocoa futures closed down 2.6 percent on Thursday in another bout of commodity selling, while investor short-covering and possible consumer buying lifted sugar Arabica coffee also closed higher, bucking the commodity complex trend that was lower for most of the session, as roasters kept nibbling after arabica futures fell from last week's 34-year top.
Oil rebounded in choppy trade. "Everyone's wondering if the commodity bubble has burst," said a London-based broker, adding this was leading investors to reduce their exposure to commodity markets and softs were no exception. Cocoa futures dropped in heavy volume, in line with the earlier weakness in commodities, as the resumption of top producer Ivory Coast's cocoa exports weighed on prices.
Top grower Ivory Coast will export around 150,000 tonnes of beans in May and June, Gerry Manley, head of cocoa at Olam International Ltd, told Reuters, with some of it heading to the United States. "I think there's going to be a lot of shipments of African cocoa over the summer and I don't think demand is quite as strong as some people are expecting so there will be pressure on the market," Olam's Manley said. ICE second-month, July cocoa tumbled $81, or 2.6 percent, to close at $3,037 per tonne. Total volume was above 23,000 lots, the highest since May 5, preliminary Thomson Reuters data shows.
"The fundamentals and technicals are bearish now, so you're getting it from both ends," said Nick Gentile, head of trading of commodity fund Atlantic Capital Advisors in New Jersey. US cocoa closed below the 200-day moving average at $3,052 after the 50-day and 100-day moving day averages crossed Wednesday, a bearish flag called the "death cross". Sugar futures consolidated higher after the raws endured the biggest losses in the sector by losing over 40 percent of its value in the past three months. Traders said sugar may also be seeing some cash interest perking up the market from countries in the Middle East and North Africa.
ICE July raw sugar futures gained 0.39 cent, or 1.9 percent, to close at 21.33 cents per lb. Arabica coffee firmed, but was under pressure from risk averse sentiment. Arabica futures dropped nearly 12 percent from a 34-year high hit on May 3 at $3.0890 per lb and total open interest sat at a 1-1/2-year low. ICE July arabica coffee rose 1.80 cents to close at $2.7495 per lb. If the commodity complex steadies, it's possible arabica coffee could quickly rise 10 cents, back towards its 34-year high, a London-based broker said.