Raw sugar futures on ICE edged up on Thursday on limited short-covering after slumping to the lowest level in nearly three years amid a strong downtrend as expectations of a third year of global surpluses weighed. ICE arabica futures inched up from the prior session's more than three-year low, while ICE cocoa posted its largest daily loss since January. July raw sugar on ICE Futures US settled up 0.03 cent, or 0.2 percent, at 16.24 cents a lb after dipping to 16.17 cents, the lowest level for the front month since July 2010.
"The market is in a bearish trend, but we're seeing a little bit of short-covering and some commercial coverage coming in at the low values," said Sterling Smith, a futures specialist with Citigroup in Chicago. Open interest in the July contract ahead of its June 28 expiration remained high relative to previous years, an indication of a potentially large delivery, dealers said.
Large deliveries are often interpreted as bearish for prices, as the exchange is seen as the buyer of last resort. The May ICE contract delivery was the largest in decades. A bumper harvest underway in top producer Brazil and expectations of global surpluses have pressured prices.
A shift of Brazilian cane mills toward ethanol production over sugar production will likely continue if sugar prices do not recover, said James Kirkup, head of sugar brokerage at ABN Amro Markets. August white sugar on Liffe was down $1.80, or 0.4 percent, to finish at $473.30 a tonne. ICE arabica prices recovered slightly on limited short-covering after sinking to $1.2280 per lb during the previous session, the lowest level since September 2009.
September arabica coffee futures on ICE inched up 0.95 cent, or 0.8 percent, to close at $1.2540 per lb. High output in Brazil and technical weakness continued to exert pressure and capped gains, dealers said. "Brazil still needs to sell. You've got a weak currency and a big crop and stuff left over from the last crop as well. It doesn't feel like it is going to have any major recovery at the moment," one London broker said, referring recent losses in the Brazilian real.
Record off-year production in the top producer has offset concerns over reduced supplies in Central America, where the roya leaf disease has threatened coffee crops. Technical weakness and readily-available supplies from top producer Vietnam pressured robusta to fifth straight daily loss. The September robusta coffee contract on Liffe sank $49, or 2.8 percent, to close at $1,731 a tonne, after touching $1,728, the second month's lowest level since January 2012.
September cocoa futures on ICE were down $68, or 2.9 percent, to settle at $2,310 a tonne, the second-month contract's largest one-day drop since January. Losses were driven by expectations of strong output from West Africa and favourable weather for region's mid-crop. September cocoa on Liffe closed down 40 pounds, or 2.6 percent, at 1,513 pounds a tonne.