Raw sugar and arabica coffee futures fell on Thursday, erasing earlier gains after the real currency of Brazil, the top grower of both commodities, continued its slide to more-than 12-year lows. Cocoa on ICE Futures US fell for the fifth straight session as dealers eyed the front-month's widening discount to forward contracts.
October raw sugar futures on ICE fell as low as 10.64 cents a lb, the lowest for the spot contract since December 2008, on the weak Brazilian currency, and later settled down 0.06 cent, or 0.6 percent, at 10.70 cents a lb. "The market is anticipating a Brazil downgrade," said Michael McDougall, director of commodities for Societe Generale in New York. "It's keeping both consumers and Brazilian exporters to the sidelines."
He added that drier weather recently in Brazil also weighed on the market by raising expectations for strong cane crush figures expected next week, which would add to the oversupplied market. October white sugar dipped $1.50, or 0.4 percent, settling at $343.50 a tonne.
September arabica futures settled down 1.65 cent at $1.2425 per lb. Prices initially rose as high as $1.2845 , the highest level for the front-month since July 15, on concerns about low yields and a lack of producer selling in Brazil, traders said. But profit-taking from investors and continued weakening of the real brought coffee into negative territory. "The real is just getting totally annihilated," said Nick Gentile, managing partner of commodity trading advisor NickJen Capital in New York.
A soft real boosts incentives for Brazilian producers to sell dollar-based sugar and arabica coffee to lock in local currency returns. September robusta futures fell $13, or 0.8 percent, to settle at $1,640 a tonne. New York September cocoa fell $63, or 2 percent, to settle at $3,057 a tonne, after falling as low as $3,054, the lowest level for the front-month since June 1.
It was cocoa's fifth consecutive day of losses, as speculators continued their exit from the market to protect profits amid the downturn of recent weeks. "The longs started getting antsy," Gentile said. "The funds are definitely taking profits." Traders also eyed the front-month contract's widening discount to forward contracts, a market condition known as contango that suggests nearby supply stability. London September cocoa settled down 35 pounds, or 1.7 percent, at 2,033 pounds a tonne.