Raw sugar futures on ICE turned negative after jumping to their highest level in 2-1/2 months on Thursday as short-covering dried up, while Liffe cocoa futures hit a five-month high. ICE arabica coffee turned negative, after touching a three-month peak to become technically overbought, as some longs grabbed profits.
The softs complex moved lower, along with several other commodities, as investors awaited clues on a Federal Reserve stimulus and a jobs report that may indicate Europe's crisis is weighing on the US economy. ICE October raw sugar futures inched down 0.06 cent to close at 21.92 cents a lb, after touching a 2-1/2-month high basis front month of 22.69 cents.
"The extent of the rally has surprised us a little bit. It has created a defensive position in the market with people not short any more," said Keith Flury, senior soft commodities analyst with Rabobank. "Sugar looks vulnerable to a potential correction." However, Thomas Kujawa of brokerage Sucden Financial said: "We think the current wave of capital inflows of money into commodities might well mean sugar tests a little higher over the next couple of days."
Chart-based speculative and trade buying, as well as some short-covering after Wednesday's holiday in the United States, also lifted the market early as the benchmark contract soared through its 100-day moving average and stopped short just below its key 200-day moving average, brokers said. There was also some suspected consumer and trade buying tied in part to the delivery of 1.1 million tonnes of sugar at expiration of the July contract last week.
"I think there's spec and a little bit of trade buying," said Mike McDougall, vice-president of brokerage Newedge USA. White sugar futures on Liffe fell, with August down $6.80, or 1.1 percent, to finish at $633.00 a tonne. Earlier it touched $645.80, the highest level for the front month since late March. Waiting times at Brazilian sugar ports, which have shortened thanks to drier weather, are likely to increase again in the coming weeks as harvesting gathers pace, a shipping agency director said.
ICE cocoa futures hit the highest level in more than three months, but then turned lower on profit-taking. London cocoa hit a five month high. London September cocoa settled up 11 pounds, or 0.7 percent, at 1,597 pounds per tonne, having earlier touched a five-month high, basis second month, of 1,619 pounds. ICE September cocoa closed down $22, or 0.9 percent at $2,328 per tonne, after hitting a the highest since March 28 at $2,375.
While the weak sterling against the US dollar weighed on ICE cocoa futures, it helped support the pound-traded Liffe market. In a report, Robobank forecast global cocoa production to grow 1.1 percent in 2012/13 to 4.093 million tonnes, but risk to output has risen due to falling farmgate prices, erratic rainfall in West Africa and the 50 percent chance of El Nino reappearing and posing a risk to crops.
Barry Callebaut, the world's largest chocolate products maker, said it was confident it would meet its financial targets after double-digit growth in the Americas and Asia supported volume growth in the third quarter. ICE September arabica coffee futures inched down 0.10 cent to finish at $1.8035 per lb after trading widely from $1.7585 to $1.8710, a double top with the session high of April 13 on a continuation chart for the second-position contract.
"One of the main things were seeing in coffee are these continued delays out of Brazil for the crop making it to the market," said Spencer Patton, founder and chief investment officer of Steel Vine Investment in Chicago, about the market's earlier strength. "It's very over bought now, it's at the top end of the range. This is a supply issue and not a demand issue, and it's a supply issue that's going to be solved." Some market participants holding long positions were taking profits, Patton said. The market then fell from levels viewed as overbought. Robusta coffee futures on Liffe were quietly firm, with September closing up $1 at $2,099 a tonne.