ICE raw sugar futures edged up on Friday, finding marginal support from short-covering after prices touched an almost three-year low during the previous session as the cane harvest in top exporter Brazil ramped up, dealers said. ICE arabica coffee futures were on track for their first weekly decline in three weeks as weather-related supply concerns in Brazil eased. Cocoa prices were higher.
Commodities were pressured by a strong US dollar, with the dollar index rising against a basket of global currencies, which makes dollar-traded raw materials more expensive to holders of other currencies, dealers said. July raw sugar futures on ICE Futures US edged up 0.06 cent, or 0.4 percent, to settle at 16.89 cents a lb. The contract slid to 16.81 cents on Thursday, the lowest level for the front-month contract since July 2010. "We're still in this downtrend, (but) it's very reasonable to expect some profit-taking (by shorts) after this week," said James Cordier, principal and founder of Optionsellers.com.
Speculators hold a large net short position in raw sugar futures and options. Raw sugar dropped about 3 percent from last week's close, its largest weekly decline in three weeks. The accelerating cane harvest in Brazil has reinforced expectations of a world awash in supplies. Dealers said the downside for prices may be limited, however, as further losses would trigger a significant shift in Brazil toward using cane for ethanol rather than sugar production.
"This year, ethanol fundamentals are tighter than sugar," Macquarie Bank analyst Kona Haque said in a market note on Friday, pointing to a trading range of 16.5 to 17.5 cents a lb during the next three months. August white sugar on Liffe closed up $1.30, or 0.3 percent, at $477.50 a tonne, but down 2.4 percent from last week's close. July arabica coffee futures on ICE dropped 2.95 cents, or 2.1 percent, to settle at $1.3690 per lb, down more than 5 percent from last week's close.
It was the second-month contract's first weekly loss since dropping 6.5 percent in late April. Dealers said the outlook for Brazil's 2013/14 harvest, an off year in its biennial crop cycle, remained favourable. Brazil government data that forecast an off-year harvest of nearly 49 million 60-kg bags set the downtrend in arabica this week, dealers said.
The forecast came as price-supporting concerns over frost conditions in the top producer began to wane. Liffe July robusta coffee was down $9, or 0.4 percent, to close at $2,037 a tonne. July cocoa futures on ICE inched up $6, or 0.3 percent, to finish at $2,300 a tonne and end the week unchanged from last Friday's close. Liffe July cocoa settled up 20 pounds, or 1.3 percent, at 1,549 pounds per tonne.