Arabica coffee futures retreated on Wednesday, retracing some of the previous session's steep gains, while US cocoa futures tumbled below their 100-day moving average on pressure from a weak sterling versus the dollar. Raw sugar closed down a shade after a choppy session. Analysts expected arabica coffee futures on ICE to keep moving lower after the biggest daily surge in five months.
They said exchange data confirmed that Tuesday's rally was due to heavy short covering, as open interest tumbled more than 3,000 lots. Speculators currently hold the biggest net short position in arabica in more than six years. The move lower on Wednesday was "a sign that the buying from that short-covering has dried up," said Sterling Smith, analyst with Country Hedging in Minnesota. "You probably are going to see rounds of new selling coming in."
May arabicas dropped 5.35 cents, or 2.9 percent, to settle at $1.8200 per lb. Benchmark Liffe May robusta coffee futures closed down $1 at $2,058 per tonne. March coffee exports by Vietnam, the world's No 2 exporter, are estimated to be up a quarter from a year ago, while its shipments in the first six months of the current 2011/2012 crop year eased 4.6 percent to nearly 13 million bags, government data show.
US cocoa sank falling along with the lower sterling against the greenback and on broadbased selling as oil led much of the commodity complex lower. May cocoa on ICE closed down $61 or 2.6 percent, at $2,295 a tonne, despite concerns over dry weather in top grower Ivory Coast.
The contract extended losses and trade volume increased as May broke well below the 100-day moving average at $2,326 per tonne. Farm-gate cocoa prices in Ivory Coast's growing regions fell last week weakened by the poor quality of tiny volumes leaving the bush, farmers and buyers said.
Many analysts have a fairly balanced global supply/demand outlook for the 2012/13 season. London May cocoa dropped 13 pounds, or 0.9 percent, to finish at 1,513 pounds per tonne. May raw sugar futures prices inched down 0.04 cent to finish at 24.26 cents per lb.
Earlier this week, India decided to allow an extra 1 million tonnes of unrestricted white sugar exports, which had weighed on the market. The market was still stuck in a consolidation pattern between 23.50 and 26.50 cents, basis May, brokers said. London May white sugar futures fell $5.40, or 0.8 percent, to close at $632.30 per tonne.