ICE sugar dips on economic worries, coffee down
London, August 8, 2011
ICE sugar tumbled almost 4 per cent on Monday, as most commodity markets were lower on fears of a prolonged global economic slowdown, after ratings agency Standard & Poor's cut its US rating late on Friday to AA-plus from AAA.
Coffee futures also eased, with dealers awaiting further information on the impact of Friday's frost in Brazil, while cocoa was slightly lower.
Raw sugar futures dipped as oil traded lower and world stocks extended losses on growing worries of a double-dip recession.
"There really hasn't been much impact in terms of market fundamentals over the last trading session, the big concern here really is the evolution of macroeconomic concerns and that's holding centre stage at the moment," Barclays Capital analyst Sudakshina Unnikrishnan said.
ICE sugar futures traded around 14 per cent off the contract high of 31.68 cents a lb touched last month.
October raw sugar on ICE was down 0.91 cent or 3.3 per cent at 26.63 cents a lb at 1100 GMT. Dealers eyed large crops in producers including India and Europe.
"The expectations are for the third quarter to stay relatively tight but from the fourth quarter onwards we start to see a larger surplus being reflected in the whole balance, especially with a rebound in Indian production," Unnikrishnan said.
Goldman Sachs' 3-month sugar price forecast was pegged at 25 cents a lb, with prices easing to 20 cents a lb in its 6 and 12 month forecasts.
"We expect sugar prices to decline modestly medium term given the decent supply outlook for Northern Hemisphere producers later this year," the bank said in a commodities note.
October white sugar on Liffe fell $19.30 or 2.6 per cent to $710.80 per tonnne.
Arabica coffee futures on ICE were also lower, unable to escape risk averse investor sentiment which weighed on the commodities complex.
"The fact has been that we're not really seeing prices behaving in line with fundamentals at this point in time because overarching sentiment is quite bearish and the entire complex is being hit by that," Unnikrishnan said.
September arabica coffee on ICE fell 4.15 cent or 1.7 per cent to $2.3385 per lb. Dealers awaited more information on the impact of a frost in Brazil's Minas Gerais, which hit on Friday.
Frost struck the heart of Brazil's coffee belt in the early hours of Friday, a freeze cooperatives said was certain to cut output next year though the full extent of damage was not known.
"I don't think the concern about frost has been to the magnitude that we could see a big reduction in Brazilian production," Unnikrishnan said.
September robusta coffee on Liffe traded down $14 or 0.7 per cent to $2,048 per tonne.
Cocoa futures on ICE eased, consolidating above the nine-week low hit on Friday, as the record 2010/11 suplus kept prices under downward pressure.
High prices encouraged a surprisingly high level of crop husbandry, which combined with ideal weather to produce a bumper 2010/11 West African crop. September cocoa on ICE was down $12 or 0.4 per cent at $2,924 a tonne after touching $2,875 a tonne last week, its lowest level since June 6.
"A return to neutral weather conditions suggests that 2011/12 production will not be as large as the current crop. As a result, we see risks that the 2011/12 global balance returns to a deficit and see upside risk to our 12-mo price forecasts of $2,700 a tonne," Goldman Sachs said.
The net-short speculative position in US cocoa futures and options shot up by more than four times in the week ending Aug. 2, as the market dropped 3.5 per cent, Commodity Futures Trading Commission data showed on Friday.
Liffe September cocoa traded down 12 pounds at 1,840 pounds a tonne. – Reuters