Arabica coffee dips to fresh 6-month low, sugar marches higher

New York/London (Reuters): Arabica coffee futures on ICE Futures US dipped to a fresh 6-month low on Wednesday as the market extended its prolonged slide with funds continuing to unwind a large bullish bet ahead of the new year.

Raw sugar futures rose, bucking a recent downtrend, while cocoa retreated.

ICE March arabica coffee settled down 0.7 cent, or 0.52%, at $1.335 per lb.

“You’ve seen some selling pressure and some long liquidation come in ahead of the new year as you see pre year-end book squaring develop,” said Stephen Platt, an analyst at Archer Financial in Chicago.

Dealers said the bulk of the net long position held by speculators had now been liquidated.

The premium for Arabica coffee prices above robusta increased to the biggest in over a year.

Robusta coffee futures were also lower as the market also took account of losses in the New York-based arabica market on Tuesday. London-based coffee, cocoa and white sugar markets were closed on Tuesday.

“Some of the tightness in robusta ... has started to ease and that is helping pressure the market to the downside,” Platt said.

ICE March robusta coffee settled down $12, or 0.57%, at $2,077 per ton.

Dealers noted the open interest on January remained comparatively large ahead of first notice day on Jan. 3.

“That is really people’s focus at the moment,” one dealer said, adding the market would be keeping a close watch on what coffee was tendered next week.

ICE March raw sugar settled up 0.45 cent, or 2.43%, at 18.99 cents per lb. The front month peaked at a two-week high of 18.94 cents on Tuesday.

Prices have slid from a peak of 23.90 cents on Oct. 6 to a low of 17.84 cents on Dec. 15 on fund liquidation against the backdrop of an improved supply outlook for the 2017/18 season.

“As long as we hold this (18-cent) level, we can push back above 19 cents,” said Josh Graves, market strategist with RJO Futures in Chicago, noting the market was largely being driven by technical signals and positioning ahead of the year-end. ICE March New York cocoa settled down $32, or 1.43%, at $2,205 per ton.

Dealers noted port arrivals in top grower Ivory Coast were now running significantly ahead of last season, reinforcing sentiment there is likely to be a significant global surplus in the current 2016/17 season.

London cocoa settled down 11 pounds, or 0.61%, at 1,805 pounds per ton.