Soft commodity futures gyrated sharply Thursday as the trade nervously eyed a European summit planning to tackle its crippling debt crisis. Cocoa, already reeling from the heavy flow of beans out of the prime West Africa growing area, plumbed a fresh 3-year low, while sugar clawed back the steep losses it had posted in the previous session. Coffee stumbled.
The European Central Bank cut interest rates by a quarter of a point on Thursday to counter the twin threats of recession and deflation in the euro zone, and is expected to unveil fresh measures to aid banks hurt by the debt crisis. ICE March raw sugar futures rose 1.08 cents or by 4.7 percent to end at 24.13 cents a lb. On Wednesday, the contract fell almost 5 percent during trading, hitting a session low of 22.99 cents.
London's March white sugar futures climbed $19.80 to close at $623.40 a tonne. On Wednesday, it fell over $20. "The markets are being held hostage by the European situation. It will have serious ramifications with outside markets," Country Hedging Inc senior analyst Sterling Smith said of the EU summit on Friday.
Technically, traders now believe raw sugar should enjoy support from the area where it held, which is 23 cents a lb. "Chart technicians are now suggesting support around 23 cents/lb is now the crucial level," said Thomas Kujawa of brokerage Sucden Financial. Cocoa futures tumbled to a fresh three-year low, with the heavy harvest pressure providing its own dynamic in pushing bean values lower.
London's March cocoa futures fell 14 pounds to end at 1,369 pounds a tonne, just above the new lifetime low of 1,347 pounds, the lowest level for the benchmark second month since late 2008. March cocoa on ICE lost $11 to end at $2,131 a tonne, the lowest settlement for the second position contract since late 2008. The contract hit a contract low of $2,078.
The abundant supply is due mainly to a big harvest in Ivory Coast, the world's No 1 producer, and in Ghana, the No 2 grower. US cocoa futures dropped below a reading of 13 on the relative strength index, a technical indicator where a reading below 30 is considered oversold.
It is the lowest on record dating back to 1973. The benchmark second position contract has dropped 24 percent in the past month, on pressure from ample near-term supplies combined with macro concerns. New York's March arabica coffee contract fell 1.20 cents to close at $2.2865 a lb. London's January robusta contract slid $43 to finish at $1,910 a tonne.