Raw sugar futures on ICE fell more than 1 percent on Wednesday as technical and producer selling weighed on prices, which had been supported earlier in the week by short covering.
Arabica coffee futures on ICE edged higher as the market consolidated after last week’s slide to the lowest level in more than two years. Cocoa also posted modest gains.
Volumes were light ahead of the Thanksgiving holiday. U.S. markets will be closed on Thursday.
In sugar, selling accelerated after sweetener prices hit stops at 19.74 cents per lb, sending prices to intraday lows of 19.55 cents. Dealers said raw sugar prices first encountered resistance at around 20 cents a lb, basis March, a level attractive to Brazilian producers.
“The Brazilians have a lot of sugar to price and with the weak Real, 20 cents has become the equivalent of probably 21 cents,” one London broker said.
March sugar futures on ICE settled down 0.26 cent or 1.30 percent at 19.64 cents a lb. The contract rose to a peak of 20.03 cents on Tuesday, its highest level since Oct. 23.
Sugar has been in a prolonged downtrend but the market has been susceptible to short-covering rallies. Prospects for a second straight substantial global surplus in 2012/13 have prompted funds and speculators to build their largest net short position since 2007.
Short covering by funds contributed to the rise in prices earlier this week.
“They did buy some of their shorts back, because they had a record short level, but I don’t think that has continued. As the market has fallen away they’ve stopped buying,” one broker said.
Dealers said buying may be triggered if the market could breach resistance around the 20-cent level.
“If it breaks above 20 cents you could see some short covering which could help the market rally, but it’s likely to be short term, there’s still a lot of sugar,” said another London-based broker.
March white sugar on Liffe fell $5.9, 1.12 percent, to settle at $518 per tonne.
Sugar underperformed broader financial markets, with commodities buoyed by a weaker dollar and U.S. equities boosted by news that Israel and Palestinian groups in Gaza have agreed a truce to end the flare-up in violence in the region.
The ceasefire offset concerns about the U.S. economy and the lack of a deal on emergency aid for debt-laden Greece.