Arabica coffee futures extended their sharp decline on Tuesday, falling to their lowest in more than 3-1/2 years as rain in top grower Brazil was expected to aid an anticipated bumper harvest. Cocoa fell for the fourth straight session to multi-week lows, weighed down by improved crop weather in top grower Ivory Coast.
Raw sugar futures on ICE Futures US were little changed in choppy dealings as the wet Brazilian weather delayed the sugar cane harvest there. Unica, the main cane industry association, reported output in the country's main growing area surged 140 percent compared with a year earlier. ICE Futures US agricultural markets were closed on Monday for the Memorial Day Holiday.
Arabica coffee futures on ICE fell 0.80 cent, or 0.6 percent, to close at $1.2645 per lb. Earlier in the session the market hit the lowest since September 2009 at $1.2580 on a spot-month basis, as surplus supplies weighed. Heavy rainfall over Brazil's sugar cane plantations, forecast to persist for most of this week, was seen briefly disrupting the harvest of an expected record crop while giving a final boost to the coffee crop now maturing for harvest. "The momentum is continuing lower, bears are in control," said one US dealer, noting the rain weighed on coffee prices.
Arabica prices are down about 12 percent since the start of the year as expectations for a record off-year crop in Brazil's biennial crop cycle have been worked into the market. The past two weeks have seen a significant decline, dropping more than 13 percent from a two-month high on May 10. "While a potent fungus is ravaging coffee bushes in Central America and threatens to reduce global supplies, a bumper harvest in Brazil is likely to keep the market well supplied," said Nitesh Shah, associate director of research at ETF Securities.
"Even if Brazil decides to hold back supply, the current production rate is likely to cap price gains." Brazil will likely export between 31 million and 32 million 60-kilogram bags of coffee in the 2013/14 (July-June) season, Guilherme Braga, of the Council of Green Coffee Exporters (Cecafe), said on Tuesday.
Liffe July robusta coffee settled down $30, or 1.5 percent, at $1,922 a tonne. Cocoa markets dropped for the fourth straight day as improved crop weather in Ivory Coast eased supply concerns, dealers said. September cocoa on Liffe ended down 19 pounds, or 1.2 percent, at 1,507 pounds a tonne, the second position contract's weakest settlement since April 15.
Industry buying below 1,530 pounds, basis London cocoa, was seen preventing steeper losses. The ICE July cocoa contract settled down $41, or 1.8 percent, at $2,205 a tonne, the lowest close for the spot contract since April 8. July raw sugar on ICE edged down 0.12 cent, or 0.7 percent, to finish at 16.72 cents a lb, having dipped to 16.56 cents on Thursday, the lowest level for the front month since July 2010.
"The sugar number was probably bigger than people expected," said a London-based broker, referring to the Unica data. Although wet weather in Brazil could delay harvest in the coming days, analysts said it could also benefit cane. "The rain is improving the prospects for the rest of the crop, as it will promote growth of the sugar cane. Thus, the prospects of a record-high sugar cane harvest remain intact," Commerzbank said in a daily commodities note. August white sugar on Liffe rose 20 cents, or 0.04 percent, to end at $476.60 a tonne.