Raw sugar futures sank below the psychological level of 20 cents per lb on ICE Tuesday for the first time in 21 months as long liquidation triggered automatic sell orders, while US cocoa dropped to a three-week low. Robusta coffee futures turned higher and moved toward Monday's intraday 8-1/2 month high, while arabica finished lower.
The euro fell against the dollar after two days of gains as investors pared back expectations that an informal meeting of European leaders this week would yield much progress in tackling the region's debt crisis. Raw sugar futures sank as investor liquidation hit the market. Automatic stop loss orders pressured the sweetener when it slid under the recent low of 20.07 cents hit on May 14, dealers said. "We couldn't get very far from (the recent) rally," said Mike McDougall, senior vice president of brokerage Newedge USA, referring to the failure of the July contract to reach 21 cents late last week.
That prompted a technical breakdown in the sweetener, he added. ICE July sugar futures sank 0.58, or 2.8 percent, to close at 19.80 cents per lb, the lowest settlement for the spot position since August 31, 2010. Analysts said sugar may have run into some consumer interest near 19.80 cents, basis the spot month.
The 14-day relative strength index stood at 28.5. A reading of 30 or below is considered oversold and traders said the market could be in for a spell of consolidation as a result. "We are pressured by currency weakness in producing countries and the stronger dollar," said James Kirkup, head of sugar brokerage at ABN Amro Markets in London.
London August white sugar dropped $13.50, or 2.4 percent, to end at $555.20 per tonne. Cocoa futures weakened as crop weather improved in top grower Ivory Coast and as concerns lingered about the country's new stabilisation system, which includes a fixed price for farmers from 2012/13.
"There's obviously a lot of uncertainty, a lot of worry. The worry is that they still haven't really addressed these issues of quality," said a European soft commodities analyst, referring to top producer Ivory Coast's reforms. ICE July cocoa futures closed down $59, or 2.6 percent, at $2,179 a tonne, after hitting the lowest level in three weeks at $2,163. September cocoa on Liffe fell 25 pounds, or 1.6 percent, to end at 1,496 pounds a tonne.
US cocoa futures broke through support around $2,200 per tonne, basis July. Robusta coffee futures on Liffe dipped below the 8-1/2 month intraday high of $2,237 per tonne hit on Monday, the highest level for the second month since September 5, 2011. Robusta came off its highs to settle lower on Monday.
On Tuesday July robusta futures jumped $41, or 1.9 percent, to settle at $2,203 a tonne, after hitting a session low of $2,142. Certified coffee stocks held in NYSE Liffe nominated warehouses fell slightly to 171,380 tonnes as of May 14, down from 172,530 tonnes on April 30, exchange data showed last week. Arabica coffee futures on ICE inched lower in choppy dealings, with July dropped 0.65 cent, or 0.4 percent, to finish at $1.7450 per lb.