Soft commodity markets turned in a muted performance on Friday as players took to the sidelines at the end of a week that saw a sharp selling spree sparked by a downgrade of the United States' credit rating. Sugar, coffee and cocoa paid little heed to the macro environment. European stocks rallied due to a ban on short selling financial shares, while investors digested news that US consumer sentiment hit its lowest in over three decades.
"The softs complex was influenced by the capital markets action globally," said Bill Raffety, senior analyst at commodities brokerage Penson Futures. "Even though the fundamental picture in a number of the softs is tight, they followed the financials lower as they continue to rattle consumer confidence," he said.
Liffe's October white sugar futures dropped $6.20 to finish at $743.50 per tonne. The market drew support from cuts in Unica's forecast for center-south Brazil sugar production to 31.57 million tonnes, from its July estimate of 32.38 million tonnes. "The Unica data is a support rather than a driver for the market," Macquarie analyst Kona Haque said.
A combination of weather factors and aging cane led analysts to revise down their cane output forecasts. "Cocoa is a technical buy today. We filled the gap at $2,805 on the December contract yesterday and we're having a technical rally on that today," said Jimmy Tintle, analyst with Transworld Futures in Tampa, Florida. Raffety said cocoa was also pressured by more-than-adequate supplies in the market and a large 2010/11 global surplus.
London's September cocoa futures gained 4 pounds to close at 1,838 pounds a tonne. London's September robusta futures added $58 to close at $2,248 per tonne. "Coffee prices continue to be vulnerable to downward corrections, as the frost season in Brazil nears its end," the International Coffee Organisation said in a monthly report.