Wednesday, 11 March 2015 01:39
NEW YORK/LONDON: Raw sugar futures on ICE slid to a six-year low on Tuesday and arabica coffee prices drifted back toward a 13-month low as top grower Brazil’s weakening currency attracted producer and speculative selling.
New York cocoa prices fell for the fifth straight session, while the London market also dropped on the strong U.S. dollar and investor liquidation.
Front-month May raw sugar futures settled down 0.25 cent, or 1.9 percent, at 13.02 cents a lb, after falling 2.2 percent to 12.98 cents, the lowest for the spot contract since April 2009.
“The key reason for sugar price weakness is the weakening real,” said Claudiu Covrig, senior agricultural analyst with data provider Platts Kingsman, referring to the Brazilian currency.
“Also, investment funds are flying away from commodities and into equities.”
Nick Penney, a senior trader with Sucden Financial Sugar, said the weak real had triggered a stampede by Brazilian millers to hedge their dollar-denominated exports.
“Weather in the growing areas of Brazil has improved as steady rains fall, benefiting the cane ahead of the start of the crush,” Penney added.
Robin Shaw, analyst with Marex Spectron, said it was not possible to predict a floor to the raw sugar market while the real was slipping, and that many mills would continue to produce even at low sugar prices because of high debts and fixed costs.
May white sugar ended down $ 2.10, or 0.6 percent, at $ 365.80 a tonne.
Brazilian producers also sought to lock in gains from the local currency with sales of dollar-denominated coffee, while traders said the weak real also attracted speculative selling.
“They are selling it and the specs are selling it too, and the roasters are just sitting there saying, ‘Come to Jesus,'” said Jack Scoville, a vice president for Price Futures Group in Chicago.
May arabica coffee futures closed down 1.95 cents, or 1.4 percent, at $ 1.3505 per lb, near last Tuesday’s 13-month low of $ 1.2888.
Most of the selling is for the May contract, causing its discount to the July contract to widen out to a contract high of around 3.5 cents.
May robusta coffee ended down $ 15, or 0.8 percent, at $ 1,856 a tonne, under pressure from the stronger dollar.
May London cocoa settled down 13 pounds, or 0.6 percent, at 2,005 pounds a tonne, while New York May cocoa finished down $ 21, or 0.7 percent, at $ 2,913 a tonne.
Copyright Reuters, 2015
