Raw sugar futures on ICE tumbled more than 5 percent on Monday, with the most-active contract taking its biggest one-day dive on heavy fund selling triggered by a fall below the key 12-cent level, while arabica coffee tapped a 4-1/2-year low.
October raw sugar settled down 0.69 cent, or 5.6 percent, at 11.56 cents per lb. Volume was heavy at nearly 107,000 lots. For the October contract, this marked its biggest one-day drop.
The benchmark contract's failure to hold above the 50-day moving average coupled with its fall below the key 12-cent level attracted heavy fund selling, traders said. The weak currency in Brazil, the world's biggest grower of sugar and coffee, against the US dollar also pressured prices, they said.
The prospect of continued strong production in India remained a bearish factor along with a decline in ethanol prices in Brazil, as it will make the production of cane into the alternative fuel less attractive and leave more available for sugar, traders said.
"Ethanol continues to cap sugar prices and, longer term, two areas where production may fall in 2019/20 (Brazil and EU) are trumped by one area where it is likely to continue (India)," broker Marex Spectron said in a market update.
The sharp drop followed the expiry of the July contract on Friday, with Alvean as the sole buyer of 6,519 lots, while the market largely shrugged off the smallest delivery in four years.
October white sugar settled down $12.40, or 3.6 percent, at $331.50 per tonne.
September arabica coffee settled down 3.45 cent, or 3 percent, at $1.1165 per lb, after falling to $1.1155, the weakest for the second position since December 2013.
"We've got a big Brazil crop coming, the dollar is strong. There are not too many positives about this market at the moment," one London dealer said.
Roasters remained largely on the sidelines despite the decline in prices, traders said.
September robusta coffee settled down $13, or 0.8 percent, at $1,677 per tonne.
September New York cocoa settled down $11, or 0.4 percent, at $2,501 per tonne.
New York cocoa prices will fall to $2,350 in the fourth quarter of 2018 before turning higher in the first quarter of 2019 to $2,375, said Capital Economics in a note. September London cocoa settled up 1 pound, or 0.05 percent, at 1,835 pounds per tonne.