SOFTS-Sugar futures dip to 3-1/2 year lows as funds keep selling

Marcy Nicholson and Nigel Hunt
Wednesday, 18 Dec 2013 | 1:02 PM ET

* Raw and white sugar futures both set multiyear lows

* Robusta nears 100-day moving average

* Strong Ivory Coast port arrivals threaten cocoa bull run

(New throughout, updates prices; adds trade comment, second byline, NEW YORK dateline)

NEW YORK/LONDON, Dec 18 (Reuters) - ICE raw sugar futures and Liffe whites quietly extended losses to 3-1/2 year lows on Wednesday, falling deeper into oversold territory as funds continued to sell a market weighed down by surplus supplies.

The rallying sterling supported dollar-traded ICE cocoa futures for most of the session while it weighed on the pound-traded Liffe market. ICE arabica rose on spillover strength from the broader commodity markets, as investors awaited hints on when the U.S. central bank will trim its monetary stimulus program. Liffe robusta dropped for the third straight day, approaching the 100-day moving average.

Raw sugar prices have fallen more than 50 percent since early 2011, depressed by rising global stocks following several seasons when production has outstripped demand. A 20 percent drop over the past two months has pushed the market into sharply oversold conditions, reaching around 14 on the 14-day relative strength index, the lowest for the spot contract since 1982.

"Fundamentally, there is significant supply pressure driving prices lower," Tracey Allen, a senior soft commodities analyst with Rabobank, said.

"Spec liquidation has been driven by fundamental oversupply in the market."

ICE March raw sugar futures dipped to 15.86 cents a lb, the weakest level for the front month since July 2010, before paring losses to 15.92 cents, down 0.04 cent, by 12:31 p.m. EST (1731 GMT). Total open interest jumped by more than 10,000 lots when the market fell on Tuesday, to 821,697 lots, the most since Oct. 29, exchange data showed.

"For the buyers, obviously prices are cheaper and the perhaps opportune buying is being met with fund selling," said Tom Kujawa, co-head of the Softs Department at Sucden Financial Sugar.

"Our best guesstimate is the market will continue lower and seems more likely to trade 15.50 cents (a lb) than 16.50 cents."

March white sugar on Liffe fell $3.00, or 0.7 percent, to $432.80 per tonne after earlier dipping to $432.50, the lowest level for the front month since May 2010.


Cocoa futures showed mixed trends with ICE March closing down $1 at $2,770 a tonne, nudging lower after holding firm for most of the session on support from the rallying sterling. Sterling-denominated Liffe March settled down 13 pounds, or 0.7 percent, at 1,771 pounds a tonne.

"It is a currency adjustment (driving the divergent trends)," one dealer said, noting a significant strengthening in sterling against the dollar.

Dealers said they were keeping a close watch on port arrivals data from top cocoa grower Ivory Coast, with the current strong pace raising some doubts about the extent of an expected global deficit in the 2013/14 season. Speculators have built huge long positions on both ICE and Liffe recently, driven partly by an expected tightening in supplies as demand outpaces production.

Robusta coffee futures on Liffe were slightly lower as the market extended its pullback from last week's peak with March down $21, or 1.2 percent, at $1,696 a tonne, just up from the 100-day moving average of $1,685.

The contract peaked at $1,813 on Friday, the highest level for the second month since late August, before the rally stalled, weighed partly by signs that the run-up in prices had led to a pick-up in selling from top grower Vietnam.

March arabica futures on ICE climbed 1.55 cents, or 1.4 percent, to $1.1570 per lb.

(Additional reporting by David Brough; editing by William Hardy, Keiron henderson and Jim Marshall)