Arabica coffee futures on ICE hovered below a 4-1/2-month high on Wednesday, taking a breather as prices reached technically overbought levels after supply concerns from top grower Brazil helped lift prices more than 25 percent. Raw sugar futures fell for the seventh straight session, reaching a four-week low, while New York cocoa dropped to a two-week trough, with some noting risk-off selling amid tensions between the United States and North Korea.
September arabica coffee settled down 0.1 cent, or 0.07 percent, at $1.4265 per lb, after nearing the prior session's 4-1/2-month high of $1.4375. Total arabica open interest has dropped by more than 13,000 lots since the spot contract began its 27 percent rally in late June, to 205,335 lots on Tuesday, a three-month low, exchange data showed.
This indicated the rally was likely driven by short-covering rather than new long positions. The contract rose to 70 on the 14-day relative strength index, a technically overbought area. September robusta coffee settled down $28, or 1.3 percent, at $2,136 per tonne.
Dealers said the weak move was a technical correction after prices rallied in tandem with arabica coffee, while September/November spreading boosted volume. Spot arabica's premium over robusta neared 46 cents per lb, a three-month high. Physical demand for robusta has been sluggish, dealers said, with most of the industry well covered and unwilling to pay high spot prices.
October raw sugar settled down 0.14 cent, or 1 percent, at 13.64 cents per lb, after falling to 13.59 cents, the lowest for the spot contract since July 13. Prices extended losses after falling below technical support around 13.73 cents, traders said.
The October discount to March widened to as much as 0.86 cent, the widest for the contract. "The world may be entering a period of greater macro uncertainty with the increasingly hawkish rhetoric coming out of the United States and North Korea," said Michael Liddiard, consultant for Agrilion Commodity Advisers.
Dealers said prices were also pressured by expectations of a wave of hedging by producers in Brazil. October white sugar settled down $2.60, or 0.7 percent, at $377.90 per tonne. December New York cocoa settled down $23, or 1.1 percent, at $2,005 per tonne, after falling to $1,983, the lowest since July 27. September London cocoa settled down 19 pounds, or 1.2 percent, at 1,557 pounds per tonne. Dealers said ample nearby supplies were weighing on the market, despite forecasts for lower production next season.