ICE arabica coffee futures hit fresh 2-1/2-year lows on Wednesday on plentiful supplies, while raw sugar rose on a flurry of short covering even as the market struggled to absorb excess supplies. Breaking a three-day losing streak, New York cocoa recovered slightly from seven-month lows hit a day earlier. Dealers said the prospect of large crops in Brazil this year was exerting downward pressure on coffee and sugar prices with both markets already oversupplied.
May arabica coffee futures on ICE settled down 1.60 cents or 1.15 percent lower at $1.416 per lb after hitting a fresh multi-year low for a second straight day. The contract fell as low as $1.411 per lb shortly before the close, its weakest since mid-June 2010. Betting on improving supplies from Brazil, the world's top grower, speculative investors have built a large net short position. "It's another market that continues to be in oversupply. There's really no urgency for (speculative investors) to cover," said a veteran US trader.
Hedge funds were rolling forward short positions when prices dipped below $1.40, while above that level there appeared to be origin selling, Rabobank senior analyst Keith Flury said. May robusta coffee futures on Liffe settled unchanged at $2,092 a tonne. March raw sugar futures on ICE settled up 0.15 cent or 0.83 percent at 18.23 cents a lb. The market touched 18.03 cents on Friday, the lowest price for the benchmark front month since August 2010.
The expiring March white sugar on Liffe rose $13.9 or 2.9 percent to settle at $498 per tonne, its loftiest level in a week. With its expiry, dealers estimated around 80,000 to 100,000 tonnes of white sugar would be delivered against the contract, mainly from Guatemala. In New York cocoa, most of the volume was linked to rolling forward positions out of March ahead of Thursday's first notice day for the front month contract.
The March-May spread widened to as high as $27 as the spot price fell to its lowest level since June last year on long liquidation. March settled at $2,143 per tonne, down 1.65 percent. May futures settled unchanged at $2,170 per tonne. It hit a seven-and-a-half-month low a day earlier. May cocoa futures on Liffe settled up 11 pounds or 0.77 percent at 1,432 pounds a tonne. The contract dipped to 1,411 pounds on Tuesday, the lowest level for the second month since April last year.