Cocoa takes biggest tumble in four weeks

NEW YORK/LONDON — ICE cocoa futures posted their biggest one-day drop in nearly four weeks on Monday, on fund selling against a backdrop of excess global supplies, while the arabica coffee premium over the more bitter robusta hovered around a three-and-a-half-year low.

September New York cocoa settled down $94, or 4.60%, at $ 1,934 per ton, after tapping $1,928, the weakest since May 26.

September London cocoa settled down £59, or 3.70%, at £1,553 per ton.

For both markets, it was the biggest one-day drop since May 24 after they simultaneously fell more than 2% within one minute of trade around 7: 20 a. m. EDT (1120 GMT).

Traders said this move was exaggerated by sell-stops around the New York contract’s 100-day moving average.

Dealers said the downtrend continued to be driven by selling by investment funds, which are holding large net short positions in London and New York cocoa.

“The funds have a short position the size of the Ivory Coast crop. It’s driving the movement,” one dealer said.

Dealers said the market also continued to be weighed by the prospect of a large global surplus this season driven by a sharp rise in production in Ivory Coast and Ghana.

September robusta coffee settled down $17, or 0.80%, at $2,108 per ton, in a modest setback after the market’s advance last week to a two-month high of $2,149.

September arabica coffee settled up 0.65 cent, or 0.50%, at $1.266 per lb.

The arabica premium over robusta basis second positions was just above 30 cents per lb, up slightly from the three-and-ahalf-year low reached on Friday at 29.60 cents.

Citi Research said this was due to arabica inventory builds and robusta supply concerns in Vietnam.

“We think recent tightness in the spread cannot persist for long and will prompt roaster switching to premium coffee beans, allowing the differential to widen in short order,” Citi said in a report on Monday.

October raw sugar settled up 0.04 cent, or 0.30%, at 13.67 cents per lb, holding just above Friday’s 16-month low of 13.50 cents.

“There is a little bit of weather risk that might be appearing in the whites market. I think in the raws market and Brazil the weather looks optimal,” one dealer said.

August white sugar settled up $ 3.10, or 0.80%, at $ 402.60 per ton. —