Forexpros – U.S. softs futures were mixed to lower during early U.S. morning trade on Tuesday, with coffee prices rising more than 1% on the back of ongoing concerns over coffee crops in Colombia.
Elsewhere, cotton prices fell on improving U.S. cotton crop prospects, while sugar futures held steady near last week’s 20-month low.
Most agricultural commodities came under pressure from broader market risk aversion, as ratings agency Fitch downgraded Japan to A+ and issued a negative outlook on the country’s credit rating.
Traders were also cautious ahead of Wednesday’s summit of European leaders, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.45% to trade at 81.47.
A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.
But gains in coffee prices bucked the downward trend across most of the commodities complex.
On the ICE Futures U.S. Exchange, Arabica coffee for July delivery traded at USD1.7655 a pound, jumping 1.25%. It earlier rose by as much as 1.7% to trade at a session high of USD1.7697.
Prices touched USD1.7232 on May 9, the lowest since August 27, 2010.
Coffee prices advanced after a U.S. Department of Agriculture attach? in Colombia said that continued rainfall in key coffee-growing regions in the country have led to stagnant production.
Colombia is the world’s second largest coffee producer. Arabica is grown mainly in Latin America and brewed by specialty companies.
Prices found further support after agribusiness service provider Rabobank said in a report that Arabica coffee is “the most undervalued” member of the soft commodities complex.
“We anticipate prices to be rangebound to October, between USD1.70 to USD1.85 a pound,” Rabobank said.
Coffee prices have been under pressure in recent months, losing nearly 28% since mid-January as traders eyed a huge harvest in top grower Brazil and speculators pushed prices lower.
Brazil is the world’s largest producer and exporter of Arabica coffee.
Meanwhile, cotton futures for July delivery traded at USD0.7694 a pound, shedding 0.75%. It earlier fell by as much as 1% to trade at a session low of USD76.69 a pound.
Cotton prices fell to as low as USD0.7631 a pound on May 17, the lowest since July 20, 2010.
Cotton’s losses came after an upbeat planting progress report from the U.S. Department of Agriculture. Nearly 62% of the U.S. cotton crop was planted as of May 20, up from 48% a week earlier and higher than the five-year average of 53% for this time of year.
In Texas, the top cotton growing state in the U.S., 48% of the cotton crop was planted, improving from 35% a week earlier. The five-year average for the week is 41%.
Cotton prices have been under pressure in recent sessions after the USDA forecast record world cotton supplies in its Supply & Demand Estimate Report published May 10.
The agency hiked its estimate on world 2012-13 cotton ending stocks to a record 73.75 million bales, up over 10% from the 2011-12 level.
The fiber has plunged almost 65% from a record in March 2011 as higher prices prompted farmers to plant more crops and demand in top consumer China slowed.
The U.S. is the world’s biggest exporter of cotton and the third largest producer of the fiber, trailing only China and India.
Elsewhere on the ICE Futures U.S. Exchange, sugar futures for July delivery traded at USD0.2030 a pound, dipping 0.02%.
The July contract traded in a tight range between USD0.2039 a pound, the session high and a daily low of USD0.2023.
Prices fell to USD0.2007 a pound on May 14, the lowest since September 1, 2010.
Sugar prices have been trading in a tight range just above a 20-month low since May 9. According to market participants a failed attempt at breaking below the key support level of USD0.2000 a pound has held prices up from moving even lower.
Sugar prices have been under pressure in recent weeks, losing nearly 23% since March 20, as increasing competition for U.S. exports and ample global supplies have been dominating sentiment.
Technical traders noted that the sugar market remains in a major bear trend. Prices are down approximately 43% since hitting a three-decade high of USD0.3594 in February of last year.
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