SOFTS-Cocoa dives on technical selling; raw sugar flat, coffee up

Thu Oct 3, 2013 2:25pm EDT

* Cocoa falls most since Aug 21 on bearish price patterns

* Raw sugar consolidates from 6-1/2 month highs

* Arabica and robusta coffee rebound from recent lows

By Barani Krishnan and Nigel Hunt

NEW YORK/LONDON, Oct 3 (Reuters) - U.S. cocoa futures had their sharpest tumble in more than a month on Thursday after technical selling triggered by bearish price patterns.

Raw sugar turned flat from a 6-1/2 month high in the previous session while arabica coffee rose modestly for a second straight day, bucking the weaker trend on the softs complex.

"It's a quiet day in softs except for what's happening in cocoa, which really is a technically-driven long liquidation due to a lack of fundamental news," said Boyd Cruel, analyst at Vision Financial Markets in Chicago.

ICE Futures' most active cocoa contract, December, settled down $53, or nearly 2 percent, at $2,585 a tonne in New York.

It was the contract's sharpest one-day decline since Aug 21, when cocoa tumbled on forecasts that rains in top growing country Ivory Coast could alleviate the dry weather that had been threatening the 2013/14 crop.

In Thursday's session, sellers crowded the cocoa market after a bearish signal triggered by the December contract's inability to rise beyond its Oct 1. high of $2,646, Cruel said.

LONG LIQUIDATION IN COCOA

"We went into heavy long liquidation from there, although we're back at a good support level right now in the $2,560 area."

Cocoa has reacted more to technical factors than fundamental news this week.

The market was lukewarm on Wednesday to a Reuters story that that Cargill was in the final stages of a deal to buy Archer Daniels Midland's cocoa business.

Prices also barely budged after Ivory Coast announced it had raised the guaranteed minimum farmgate price for cocoa to 750 CFA francs ($1.55) per kilogram for the 2013/14 main crop, from 725 CFA francs in the last season.

Derrick Lewis, technical analyst for softs at Chicago's Cleartrade Commodities, said a close above $2,610 on ICE's December contract might have stemmed the selling pressure in cocoa.

"Otherwise, we may see the market drifting further down," he said.

London's December cocoa contract on Liffe closed down 24 pounds, or 1.4 percent, at $1,663 pounds a tonne.

Technicals aside, the cocoa market's focus could soon turn toward third quarter European grind data due next Thursday, brokers in London said.

The market is expecting the grind numbers to be higher after the method for calculating the data was adjusted to compensate for discrepancies in recent quarters caused by the exclusion of a German grinder.

RAW SUGAR FLAT

Raw sugar futures were flat, taking a breather from Wednesday's 6-1/2 month highs which came after the market reacted positively to the biggest sugar purchase in more than two decades by a single merchant, Louis Dreyfus.

Concerns over the impact of rains on Brazil's cane output had also underpinned raw sugar in recent sessions.

In Thursday's trade, ICE's raw sugar for March closed up 0.1 cent at 18.52 cents a lb. It hit 18.56 cents on Wednesday, the highest since mid-March for a front-month raw sugar contract.

Some in the market, like Thomas Kujawa, co-head of softs at London's Sucden Financial, see the contract having potential to rise as high as 18.90 cents.

"However, from a medium term perspective, it doesn't seem to be a buy opportunity," Kujawa told Reuters.

London's white sugar for December slipped $1, or 0.2 percent, to $491.20 per tonne.

COFFEE CLIMBS

Arabica coffee climbed for a second day as the weaker dollar helped it recover from recent lows, although the market's upside was capped by excessive supplies of the commodity.

Arabica's benchmark December contract on ICE rose 0.9 cent, or 0.7 percent, to finish at $1.1535 a lb.

The market had slumped to a more than four-year low of $1.1105 on Sept. 17, burdened by huge stockpiles around the world and a looming large crop from No. 1 producer Brazil.

Robusta coffee also rose, from a 3-year low hit last Friday on worries about a potential bumper harvest in top producing country Vietnam.

Robusta's second month position on Liffe closed up $31, or nearly 2 percent, at $1,693 a tonne.

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