Sugar futures tumbled on Thursday, as bumper supplies from top grower Brazil and major exporter Thailand scuppered a modest advance in the sweetener. Arabica coffee settled at the lowest level in more than six weeks, while cocoa finished flat to slightly down, with most investment fund money moving to the grains complex earlier. Volume in New York soft commodities was below the 30-day norm, preliminary Reuters data showed.
"We're seeing general commodity liquidation across the board," said Sterling Smith, a senior analyst with brokers Country Hedging Inc in Minnesota. Dealers noted Rabobank projected a global sugar surplus of 5.7 million tonnes in 2011/12 and revised up its 2010/11 surplus estimate to almost 3 million tonnes.
"This is in line with other statisticians' expectations of a large surplus and while access to supplies is problematic in the short term, it seems the sugar will be available eventually," brokers Sucden Financial said in a market note. Analysts at Brazilian bank Itau BBA forecast an even larger 2011/12 global sugar surplus of 6-8 million tonnes, up from a surplus of around 3 million tonnes in 2010/11.
July raw sugar on ICE sank 1.03 cents, or 4.5 percent, to end at 21.82 cents per lb. Charles Funnell, of fund manager Aisling Analytics, said the level of 20 cents a lb could provide a floor for the market. Arabica coffee futures also declined, having dropped about 15 percent from a 34-year peak set earlier this month at $3.0890, basis second position. A shortage of high-quality beans remained a concern, however.
"The sharp drop in New York arabica futures in the last ten days represents a good buying opportunity, as many roasters still remain insufficiently forward covered," Macquarie Bank said in a commodities note. ICE July arabica tumbled 6.35 cents, or 2.4 percent, to finish at $2.6370 per lb, the lowest settlement since April 4. The market showed weak signals, failing to hold Wednesday's upward momentum after selling off the highs while other commodities remained strong.
"If you're going to be long anything, I would think coffee would be the one to do it," said Bill Dixon, senior market strategist at MF Global Ltd's Lind-Waldock division in Chicago. ICE cocoa futures fell, as exports from top producer Ivory Coast picked up after a political crisis had stalled trade for several months. Dealers are concerned the recent conflict in Ivory Coast could have had a negative impact on the country's mid crop, which runs from April to September. ICE July cocoa closed down $16 at $2,979 per tonne, while Liffe July cocoa finished flat at 1,865 pounds a tonne.