ICE sugar drops after speculators slash net short position

August 20, 2013

ICE sugar
ICE sugar

Futures of ICE sugar had their biggest one-day tumble in nearly two months on Monday, after a sharp fall in speculators’ net short positions indicated that the recent short-covering rally may have run its course. Cocoa on ICE Futures US and Liffe turned higher, as dealers showed concern about dry weather delaying the harvest in top grower Ivory Coast, while arabica coffee pared earlier losses.

The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities made up of 19 markets, rose about 0.2 percent to a 4-1/2-month high. Minutes from the Federal Reserve’s most recent policy meeting will be released on Wednesday and could shed light on when the central bank plans to slow its $85 billion-a-month in bond purchases, a tricky process that has been making markets nervous for months.

October raw sugar on ICE fell 0.41 cent, or 2.4 percent, to settle at 16.53 cents per lb, having earlier hit a three-week low of 16.45 cents, after the drop in speculators’ net short position was perceived as bearish. Total volume exceeded 122,000 lots by 1:49 pm EDT (1749 GMT), the highest since August 2, preliminary Thomson Reuters data showed.

“The short-covering has dried up,” Sterling Smith, a futures specialist for Citigroup in Chicago said, referring to the driving momentum behind last week’s seven-week rally. Speculators cut their net short position in raw sugar by more than half to a five-month low in the week ended August 13, US Commodity Futures Trading Commission data showed on Friday. James Kirkup, head of sugar brokerage at ABN Amro Markets, said the raws will move sideways to down from here.

“I think to re-establish upside momentum it’s got to somehow take out the 17.29 area and with the Brazilian real doing what it’s doing, that seems unlikely,” Kirkup said. Top grower Brazil’s currency dropped to its weakest level in more than four years, cushioning Brazilian producers from falling dollar-denominated world prices. “We’re seeing producer selling from around 17 cents, maybe they think it might retrace to higher prices,” a London-based broker said.

October white sugar on Liffe declined $11.90, or 2.4 percent, to settle at $491.40 a tonne. December cocoa in London settled up 8 pounds, or 0.5 percent, at 1,658 pounds a tonne, after falling earlier. “The technical picture in the short and medium term is neutral,” a British-based broker said. “As long as it (December) can hold above 1,613 pounds, the longer-term picture still looks constructive.”

Dealers continued to monitor weather in the Ivory Coast where its main cocoa crop harvest will be delayed by at least a month in most of its leading cocoa-growing regions due to weeks of dry, cool, and overcast weather, farmers said on Monday. December cocoa futures on ICE climbed $17, or 0.7 percent, to $2,512 a tonne. It is first notice day for the September contract.

In coffee, December arabica futures on ICE declined 0.90 cent, or 0.7 percent, to close at $1.2275 per lb, also under pressure from the weaker Brazilian real, which attracted producer selling of the dollar-traded currency, dealers said. “If the real hadn’t weakened then it was possible that the market would have been steadier, but the price is fine for Brazilian farmers. They will let some coffee go at these prices,” a London-based broker said. Liffe November robusta coffee finished down $25, or 1.3 percent, at $1,876 a tonne. Courtesy Reuters
ICE sugar
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