Cocoa futures on ICE and Liffe dropped to multi-month lows on Monday, as funds kept liquidating long positions after prices fell below key technical levels, dealers said. Sugar and coffee on ICE Futures US and Liffe bucked the broad decline in commodities, rising from recent multi-year lows as rainfall complicated harvesting in top grower Brazil.
The Thomson-Reuters Jefferies CRB index dropped for the third straight day to a one-year low. Gold and copper prices fell as the prospect of slower growth in China and the US central bank's plans to rein in monetary stimulus worried investors. Cocoa futures on ICE pared losses after falling to a 2-1/2-month low as non-commercial dealers continued to liquidate long positions. Speculators cut their cocoa net long position by 1,760 lots to 35,590 in the week, US Commodity Futures Trading Commission data showed post-market Friday, in the week ending June 18.
"The weather is favourable for harvesting in West Africa, indicating that there is plenty of supply around," a London-based cocoa futures broker said. ICE September cocoa settled down $2, or 0.1 percent, at $2,149 a tonne, just above a 2-1/2-month low basis second month of $2,135 touched earlier in the session. Liffe September cocoa ended down 9 pounds, or 0.6 percent, at 1,428 pounds a tonne, having fallen to 1,420 pounds earlier in the session, the lowest level for the second month since early March. Short-covering by funds buoyed sugar futures, which were consolidating after the fall of the commodity complex last week.
July raw sugar on ICE jumped 0.27 cent, or 1.6 percent, to settle at 17.01 cents per lb, rising further above a three-year low of 16.17 cents hit on June 13. Nick Penney of broker Sucden Financial Sugar said rain had made an unwelcome appearance in the growing areas of the centre-south of Brazil, and was forecast to remain into July. "This has caused a scramble for cover in July/October. With physical premiums in Brazil increasing over the week, this shows that players are worried and are taking action," Penney said.
The July/October spread narrowed to a discount of roughly 0.14 cent per lb, versus the last trade at 0.19 cent on Friday. The July contract will expire this coming Friday. Wet weather that entered Brazil's main centre-south cane belt over the past week is expected to linger through the rest of June, complicating the production and export of sugar, local forecaster Somar said on Friday.
August white sugar on Liffe ended up $14.40, or 2.9 percent, at $510.90 a tonne, after reaching a three-month high at $513.90. Dealers noted that the premium for nearby white sugar on Liffe has recently soared, reaching a session high at $26.80 per tonne, the highest in seven months, linked to concerns over Thai millers holding back supplies and logistical problems facing Mexican exporters.
September arabica coffee on ICE closed up 0.85 cent, or 0.7 percent, at $1.2015 per lb, with dealers noting some support from harvest-hampering rain in top grower Brazil. The day's price was not far off the lowest level for the second month since July 2009 of $1.1710 per lb, hit on Thursday, pressured by a big Brazilian off-year crop. The upside to prices, however, was viewed as limited. "The real currency has provided support to Brazilian producers and exporters who have coffee in their inventories and want to clear the deck for the new harvest," said Stefan Uhlenbrock, analyst with F.O. Licht.
The world coffee inventory will rise to its highest in five years in the 2013/14 crop year as an overhang of stock in Brazil will offset an expected drop in output and modest increase in demand, the US Department of Agriculture reported on Friday. Liffe September robusta coffee closed up $18, or 1 percent, at $1,761 a tonne. The contract fell to $1,704 on June 14, the lowest level for the second month since October 2010.