Raw sugar futures closed at a five-week low on Monday after a wave of late-day selling pushed the market below a key technical level, while cocoa futures drifted lower on profit-taking despite poor crop weather and an outbreak of violence in top grower Ivory Coast. Arabica coffee futures jumped above a key technical level but remained range bound.
A key focus of the softs markets was on Brazil, the world's top sugar and coffee producer. Dealers said they expected Brazilian sugar cane crush figures in the second half of July to have exceeded the first half of the month due to favourable harvest weather, adding market pressure.
A slow start to the monsoon in India, the world's No 2 sugar producer, and the risk of adverse weather due a possible El Nino phenomenon could curb production towards the end of the year underpinned sugar prices for most of the session. Benchmark October sugar futures on ICE fell 0.17 cent, or 0.8 percent, to close at 21.83 cents a lb, the lowest settlement in five weeks. The contract closed below the 100-day moving average for the first time since early July.
Total volume was thin with less than 48,000 lots trading, the lowest since mid-May, preliminary Thomson Reuters data and ICE historical data showed. "I don't think the market has a really strong trend. We're now looking for any kind of news that can push the market in any direction," said Alex Oliveira, senior sugar analyst at brokers Newedge USA. Expectations of a big global sugar surplus, with harvests in coming months, weighed on sugar. "We continue to anticipate a new range of 21 to 22 cents basis October in the near/medium term and suspect producers and trade are gearing up to sell anything above on any rally," said Nick Penney of brokerage Sucden Financial.
October white sugar on Liffe ended up $1.90, or 0.3 percent, at $607.70 per tonne in light turnover of 1,582 lots. Speculators cut their net long position in raw sugar by 2,532 lots to 80,848 lots, US Commodity Futures Trading Commission data showed on Friday. ICE December cocoa futures inched down $2 to settle at $2,409 a tonne, trading well below Friday's five-month high, basis second-position at $2,444.
The market was weak despite poor crop weather in Ivory Coast as well as the discovery of the fungal black pod disease there, which is seen as a potential threat to early main crop production. Violence in Ivory Coast's commercial capital Abidjan on Monday, when military officials said gunmen killed five soldiers and seized weapons in a pre-dawn raid on an army camp. This heightened fears of renewed instability in the world's top cocoa-growing country.
The violence was seen underpinning the market. "All signs point to a cocoa market that should be trading higher. Weaker dollar, stronger outside markets, and news from West Africa that should usually push it higher," said Hector Galvan, senior market strategist for RJO Futures in Chicago.
London December cocoa settled quietly flat at 1,630 pounds per tonne, after trading lower for most of the session, ending below Friday's 8-1/2-month high, basis second month, of 1,651 pounds. Arabica coffee futures moved in the other direction, feeling a lift from the firm commodity complex and weaker US dollar , with the benchmark September extending its gains after breaching the 100-day moving average around $1.76 per lb.
Still the market was range bound and dealers said they expected arabica prices to trade mostly sideways in the near term. September arabicas on ICE climbed 1.70 cents, or 1 percent, to finish at $1.7550 per lb. Upside price potential was capped by the favourable harvesting weather in Brazil, dealers said. There was also light position rolling out of September into the December contract, ahead of the spot contract's first notice day August 23, dealers said. November robusta coffee futures climbed $14, or 0.6 percent, to finish at $2,215 a tonne.