ICE Sugar Plunges

Raw sugar futures on ICE plunged almost 4 percent on Thursday as funds and speculative investors continued to liquidate positions amid talk that importers may be cancelling cargoes. Coffee hit one-month lows and cocoa plumbed levels last seen in July amid plentiful supplies and sluggish consumption.

Reinforcing concerns about weakening demand was widespread talk about sugar washouts - where buyers give up the obligation to take delivery by paying a penalty - which centred on China and India, dealers said. Buyers may be walking away from hundreds of thousands of tonnes worth of contracts after sup ply concerns that sent prices a s high as 24 cents a lb in mid-July dissipated. Prices have since plunged 15 percent.

"This is a technical breakdown precipitated by rumours of washouts not yet confirmed. Washout talk generally filters down after the fact, but where there's smoke, there's fire," said Michael McDougall, a vice-president for brokers Newedge USA. Dealers also cited the absence of China as further evidence of weakening destination buying. Imports by the world's largest sugar consumer may drop by as much as half in the season to September 2013 on rising domestic output, competition from substitute sweeteners, high inventory and a slowing economy, a Reuters poll showed on Thursday. March raw sugar on ICE settled at a one-month low, down 0.81 cent, or 3.81 percent, at 20.45 cents a lb, after selling accelerating as prices pierced a string of short- and long-term moving averages.

Dealers suggested further declines will encourage more liquidation by speculative and fund longs. "Lower import demand overall, especially from Russia and China, remains a drag on this market, and production growth elsewhere will still lead to another surplus globally," Kona Haque, Macquarie analyst, said in a market note. December white sugar on Liffe fell $22, or 3.70 percent, to $568.4 per tonne. December arabica coffee futures on ICE fell 1.65 percent to $1.6075 per lb, their lowest level since September 6.

Dealers said a run-up in prices earlier this month encountered decent Brazil selling above $1.80 per lb with the market currently well supplied. ICE certified arabica stocks continued to climb and stood at 2.253 million bags as of October 10, following a prolonged increase from barely more than 1.5 million bags in early May. Robusta coffee futures on Liffe fell, with November settling 1.05 percent lower at $2,076 a tonne.

After piercing its 100-day moving average, ICE December cocoa futures fell to lows last hit on July 31, with the next technical support - its 200-day moving average at $2,341 - preventing further losses. December recovered some ground to settle down $21, or 0.9 percent, at $2,351 per tonne. March cocoa futures on Liffe settled down 16 pounds, or 1.04 percent, at 1,527 pounds a tonne.

SOURCES FROM: REUTERS 12 Oct 2012