Raw sugar futures on ICE got thrashed to close down 10 percent Thursday after posting their biggest intraday percentage decline in more than a decade as investors grabbed for the cash and ran for the exits on 2010.
London robusta coffee futures closed strong after touching a 2-1/4-year high, underpinned by a delayed Vietnamese harvest. The arabica coffee and cocoa markets finished quietly lower.
London-based agricultural contracts on NYSE Liffe will close early by 1218 GMT (7:18 a.m. EST) on Friday ahead of the New Year holiday Jan. 1, and will be closed Monday. The coffee, cocoa and sugar markets trading on ICE Futures U.S. will trade regular hours on Friday and will shut Monday.
"I think that's all that's going on in these markets — profit-taking," Jack Scoville, an analyst for brokers The Price Group in Chicago, said, adding the same can be said of the entire softs complex.
Despite the day's sharp losses, after the spot contract hit a 30-year high at 34.77 cents per lb on Wednesday, raw sugar futures were still on course for a third consecutive yearly gain after seeing the most volatile year since 1981.
ICE March raw sugar futures dropped 3.45 cent or by 10.2 percent to finish at 30.38 cents per lb, after falling 12.8 percent intraday, the biggest daily percentage drop since 2000. The selling intensified below 33 and then 32 cents.
London March white sugar also slumped, dropping $65.10 or 7.9 percent at $761.30 per ton, far below Wednesday's all-time high at $835.80.
Physical demand is expected to decline due to the current high prices, senior trade sources said.
"We expect some demand destruction," said Alan Wood, managing director of London-based merchant Czarnikow.
Wood said he expected the raw sugar market to be well supported before expiry of the ICE March raw sugar futures contract on Feb. 28 due to tight supplies and low inventories.
Trading in the first few weeks of 2011 will be dominated by "a lot of fund rebalancing," Scoville said.
The rebalancing will take place as investors try to take advantage of rallies in commodities such as sugar, cotton, and arabica coffee among others to expand their positions in those markets.
Robusta coffee futures bucked the day's weak trend and closed higher, lifted by the unseasonal rains that delayed harvest in top grower Vietnam.
London second-month robustas settled up $60 or 3 percent at $2,084 per ton in moderate volume of 7,373 lots at 1525 GMT, having earlier touched a 2-1/4-year peak of $2,152.
"The harvest in Vietnam is ongoing and should be finished soon," said Andrea Thompson, an analyst at Coffee Network, adding that output was expected to be around 20 million 60-kg bags, in line with the previous crop.
"Quality is the primary concern rather than quantity," Thompson said, noting that the market won't get an update on quality until the beans begin reaching the market in January.
Arabica coffee fell, turning lower after failing to breach last week's 13-1/2-year high at $2.4225 per lb, on year-end profit-taking, dealers said.
ICE March arabica coffee futures dropped 3.35 cents to settle at $2.3630 per lb. The spot contract was on track finish the year up more than 70 percent, its biggest percentage gain since 1994.
Cocoa futures fell as concerns over the supply pipeline from top grower Ivory Coast eased in holiday-thinned volumes despite a disputed election in Ivory Coast.
"This political strife initially injected some premium into the market. That is still there, and if this situation is able to be resolved in any kind of real fashion, then prices should be able to come down because there is really a lot of supply," said Keith Flury, a senior commodity analyst with Rabobank.
ICE March cocoa fell $65 to settle at $3,000 per ton, in an inside day.
The spot contract was on track to see its first weak annual performance in five years ahead of the last trading day of 2010 Friday.
London second-month cocoa finished down 29 pounds at 2,034 pounds per ton.
Dozens of cocoa trucks stood by the river dividing Ivory Coast from Liberia on Thursday as young men threw bags of beans to the ground to be carried illegally but in plain view across a wood-plank bridge.
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