Cocoa futures ended mixed after clawing up from the lowest levels in roughly three years on Tuesday, as short-covering kicked in, while raw sugar dropped to a five-month low. Coffee was little changed in choppy dealings on the heels of the US dollar, as global markets steadied following a sell-off on worries over US and European debt.
Cocoa futures have dropped more than 10 percent in the past two weeks as a second consecutive bumper cocoa crop from West Africa weighed on the market, taking the London market to the lowest in three years and the New York market to the lowest in 2-1/2 years.
"It a reversal in the works so we have some short-covering mixed with some bottom picking off the reversal. Looks like good arbitrage and spec sellers," said one veteran US cocoa dealer. London March cocoa futures closed down 1 pound at 1,540 pounds a tonne, after hitting 1,525 pounds, the lowest level for the second month since December 2008. March cocoa on ICE finished up $7 at $2,421 a tonne, after dropping to $2,395, the lowest level for the second month since May 2009. "Large West African supply is likely to cap prices in the near term," said Abah Ofon, commodities analyst at Standard Chartered Bank.
Ivory Coast's main cocoa growing regions were mostly dry last week, farmers said on Monday, in what might augur an early start to the dry season in some parts in the world's top grower.
Raw sugar futures stumbled on investor selling which was triggered in part by news that India has decided to allow 1.0 million tonnes of white sugar exports, which is double initial expectations from the world's No. 2 producer. "The market broke when the Indians announced they were going to export an additional million tonnes of sugar," said The Price Group senior analyst Jack Scoville.
The prospect of Indian exports meant there will be sugar available to meet cash offtake from countries such as China and maybe even Pakistan, trade sources said. ICE March raw sugar futures dropped 0.65 cent, or 2.7 percent, to settle at 23.44 cents a lb, after falling to a five-month low at 23.33 cents. March white sugar futures on Liffe reversed to close down $10.80, or 1.7 percent, at $613.90 per tonne, after falling to an eight-week low at $610.30. Raw sugar futures were unchanged with dealers expecting the forecast 2011/12 global surplus to weigh on prices going forward. March arabica coffee futures on ICE finished down 0.10 cent at $2.3690 per lb, while January robusta coffee on Liffe ended up $7 at $1,878 a tonne.