Sugar eases on ample supplies, coffee slips
London, May 19, 2011
ICE sugar fell on Thursday as upward revisions to crop forecasts weighed, while coffee and cocoa consolidated lower following the recent commodities sell-off.
ICE raw sugar futures eased, unable to sustain their upward momentum, after rallying 4 per cent higher the previous session.
'Sugar is letting off steam. There could be some origin selling as well as profit taking after the rally,' Keith Flury, analyst at Rabobank said.
Rabobank projected a global surplus of 5.7 million tonnes in 2011/12 (October/September) and revised up its 2010/11 (October/September) surplus estimate to almost 3 million tonnes on Thursday.
The improving supply outlook and expectations that the global market would shift into surplus weighed on prices.
Large crops expected from key producers including Brazil and Thailand and delayed purchases from importers hoping for lower prices were bearish for the price outlook.
ICE July raw sugar futures were down 0.23 cent or 1 per cent to 22.62 cents a lb at 1050 GMT. Prices remained above the eight-month low of 20.40 cents hit on May 6.
Liffe August white sugar traded down $2.00 or 0.3 per cent to $631.00 per tonne, above the eight-month low of $571.90 touched earlier this month.
Arabica coffee futures were also lower, consolidating after steep losses in the recent commodities sell-off, underpinned by a shortage of high quality beans.
'The sharp drop in New York arabica futures in the last ten days represents a good buying opportunity, as many roasters still remain insufficiently forward covered,' Macquarie Bank said in a commodities note.
ICE July arabica coffee was down 2.4 cent or 0.9 per cent at $2.6765 per lb at 1051 GMT, below the 34-year peak of $3.0890 hit on May 3.
'There is still a good chance that prices could head back up above $3.00 a lb in a few months, especially if there is a frost risk, or demand remains unfulfilled,' Macquarie said.
A note from Commerzbank reiterated the risk of high coffee prices remaining, saying, 'The shortage of high-quality coffee beans is likely to persist and arabica prices should stay at a high level.'
Liffe July robustas were down $3 or 0.1 per cent at $2,528 a tonne.
ICE cocoa futures were lower, as the pace of exports from top producer Ivory Coast picked up, after a political crisis stalled trade for several months.
Cargill hopes by the end of June to ship cocoa that has been stuck in its warehouses during Ivory Coast's political crisis, the US agribusiness company said on Wednesday.
Dealers are concerned that the recent conflict in Ivory Coast could have had a negative impact on the country's mid crop which runs from April to September.
'There is a risk... that not all of this mid crop will get harvested due to the loss of migrant labour following the war, lack of security in the bushes due to loitering gunmen and still poor access to cash,' Macquarie said.
ICE July cocoa was down $15 or 0.5 per cent at $2,980 per tonne at 1052 GMT, while Liffe July cocoa traded down 7 pounds at 1,858 pounds a tonne.
'Industry is a light buyer but doesn't really need to panic for the time being,' a London-based broker said. – Reuters