Sugar futures changed direction and closed at two-year lows on Thursday on a rash of late-day selling that kept both the white and raw markets in firm downtrends, while cocoa futures extended their gains to multi-month highs on a lack of producer selling. Coffee futures added to recent losses, dropping to multi-week lows.
Sugar and coffee markets ignored the European Central Bank's announcement for a new bond buying program to solve the euro zone debt crisis. A program that helped lift US corn and wheat futures. Raw sugar futures on ICE edged higher early in the session on continued October/March spreading before the spot contract's expiry on September 28. An improved outlook for production in top producer Brazil weighed on the market. A wave of late-day selling pushed the market lower.
"At present, the expected decrease in Indian sugar production as a result of the poor monsoon season offers no effective crutch for the price because the market appears to be focusing solely on the news of growing supply from Brazil," Commerzbank said in a market note on Thursday. India's monsoon has also revived, lifting the threat of prolonged drought in the major sugar producer with a second consecutive week of heavier-than-normal rains.
ICE October raw sugar futures fell 0.14 cent, or 0.8 percent, to settle at 18.87 cents per lb, the lowest settlement for the spot contract since August 2010. October white sugar futures on Liffe fell $6.30, or 1.1 percent, to finish at $545.90 per tonne, also the lowest close for the front month since August 2010.
ICE December cocoa closed up $37, or 1.4 percent, at $2,691 per tonne, the highest settlement since November 7, 2011. The market has climbed more than 13 percent in the past two weeks. Total open interest hit a record high at 202,083 contracts on September 5, exceeding the typically larger Liffe cocoa open interest at 201,725 contracts, exchange data showed.
Liffe December cocoa finished up 15 pounds, or 0.9 percent, at 1,735 pounds a tonne, the second positions strongest close since October 27, 2011. "The global cocoa market is going to move into deficit (in 2012/13) and the market is pricing this in right now," said Macquarie analyst Kona Haque.
Macquarie, in a quarterly report on Thursday, forecast a global cocoa deficit of 101,000 tonnes in 2012/13 versus a surplus of 73,000 tonnes in 2011/12. World cocoa production was forecast to fall 2.9 percent in 2012/13 and global grindings rise 1.5 percent. ICE December arabica coffee futures slid 2.40 cents, or 1.5 percent, to close at $1.5820 per lb, the lowest settlement since June 20. Robusta coffee futures on Liffe also fell with November ending down $26, or 1.3 percent, at $2,012 a tonne, after falling to the lowest since July 10 at $1,979 per tonne.