Raw sugar futures on ICE fell sharply from the highest level in more than four years on Thursday, creating a potentially bearish technical formation after chart-based selling heavily pressured prices amid broad-based weakness in commodities. Cocoa and coffee prices also fell as the 19-market Thomson Reuters CoreCommodity Index broke a four-day streak higher.
March raws settled down 0.7 cent, or 2.9 percent, at 23.11 cents per lb, after reaching 23.90 cents, the highest on a spot continuation chart since July 2012. The contract opened above the prior session's high and closed below its low, forming a potentially bearish signal called an "outside reversal lower". Dealers said the correction was due to a lack of follow-through buying and then technical selling by funds that had built up record long positions in the sweetener, while strong resistance remained around 24 cents. The overall mood in the market, however, remained bullish owing to production concerns in Brazil, India and Thailand.
"The fundamentals continue to point to tightness in Q1 next year and possibly later if CS Brazil harvest starts late. End users' price ideas are rising and support is coming in sooner on the futures markets," wrote trader Nick Penney in a report for Sucden. Fresh concerns about Thailand's 2016/17 output have added to existing worries about falling cane production in India and Brazil's center-south region.
"The flip side is a 'concern' (for the longs) that if most (if not all) the existing bullish news is now priced into the market, fresh bullish news may also be required just to avoid a further/deeper correction, especially if the important technical support levels are broken which could trigger some of the spec trailing sell stops," Agrilion Commodity Advisers said in a note. "There are suggestions that these may be potentially both bigger and closer to the market than they have been recently." December whites settled down $14, or 2.3 percent, at $590.50 per tonne. Cocoa futures fell amid broad-based selling after posting four consecutive rises.
March London cocoa settled down 15 pounds, or 0.7 percent, at 2,211 pounds per tonne, while New York December settled down $49, or 1.7 percent, at $2,787 per tonne. In coffee, arabica prices fell to a five-week low, while robusta also dropped as forecasts for crop-beneficial rains in top grower Brazil weighed on prices, traders said. November robusta coffee settled down $8, or 0.4 percent, at $1,986 per tonne, while December arabica settled down 1.8 cent, or 1.2 percent, at $1.464 per lb.