Forexpros – U.S. soft futures were mixed during early U.S. morning hours on Monday, with cotton prices continuing to draw support from signs of increasing demand from top consumer China.
Meanwhile, sugar futures edged lower as investors cashed out of the market to lock in gains from last week’s rally that took prices to the highest in more than a month, while coffee futures consolidated above the previous session’s two-year low.
Farm commodity traders continued to monitor developments out of the euro zone. Market sentiment firmed up earlier following a victory for the pro-austerity New Democracy party in weekend elections in Greece.
But investors remained cautious amid concerns over whether a viable coalition government can be formed.
In addition, investors have been increasingly anxious over rising borrowing costs for Spain and Italy, amid fears they will be the next euro zone countries to require international bailouts.
The yield on Spanish 10-year bonds climbed to a euro-era high of 7.14% earlier in the day, above the critical 7% threshold which prompted bailouts in Greece, Ireland and Portugal.
Meanwhile, the yield on Italian 10-year bonds ticked up to 6.06% from 5.87%, amid fears over sovereign debt contagion from Spain and Greece.
Later in the day, a two-day G-20 summit was set to begin in Mexico, amid hopes it could produce fresh measures to combat the crisis in Europe.
On the ICE Futures U.S. Exchange, cotton futures for July delivery traded at USD0.8040 a pound, climbing 0.55%. It earlier rose by as much as 1% to trade at USD0.8135 a pound, the highest since May 11.
Cotton prices surged nearly 10% in the past five sessions, as sentiment on the fiber improved after the U.S. Department of Agriculture announced a sale of approximately 1 million metric tons of new-crop cotton to China last week.
China bought close to 94% of the 795,700 bales of the net export sales from the U.S. in the week ending June 7, in an attempt to boost government stockpiles after prices fell to attractive levels.
Prices slumped to a 32-month low of USD0.6617 a pound on June 4. But futures have been on an uptrend in recent sessions, gaining nearly 18% since then.
Despite the recent gains, the fiber is still down almost 60% from a record in March 2011 as higher prices prompted farmers to plant more crops and demand in top consumer China slowed.
Elsewhere on the ICE Futures U.S. Exchange, sugar futures for July delivery traded at USD0.2071 a pound, shedding 0.3%. Prices touched USD0.2101 a pound earlier, the highest since May 8.
Sugar prices have gained approximately 10.5% since dropping to a two-year low of USD0.1886 a pound on June 4, as concerns that heavy rains in Brazil could damage sugarcane crops in the country’s center-south region boosted sentiment on the sweetener.
The nation’s leading sugar cane industry association Unica said last week that mills in the center-south crushed 35.62 million metric tons of cane in the second half of last month, down 18% from a year earlier.
Brazil’s Center South-region produces nearly 90% of the nation’s sugar. Brazil is the world’s largest sugar producer and exporter, with the USDA estimating the nation accounts for nearly 20% of global production and 39% of global sugar exports.
However, market participants were wary of pushing prices higher, as the sugar market remains in a major bear trend.
Prices are down approximately 42% since hitting a three-decade high of USD0.3594 in February of last year.
Meanwhile, Arabica coffee for July delivery traded at USD1.5063 a pound, slumping 0.85%. It earlier fell by as much as 1% to trade at a session low of USD1.5018.
Coffee fell to as low as USD1.4887 a pound on Friday, the lowest since mid-2010.
Coffee prices have dropped to fresh two-year lows in each of the past six sessions leading up to Monday.
Coffee prices have been under pressure in recent months, losing nearly 37% since mid-January as traders eyed a huge harvest in top grower Brazil and speculators pushed prices lower.
Market participants said that coffee prices remain vulnerable to losses as hedge funds and large institutional investors liquidate long positions amid concerns over the global macroeconomic outlook.
Jitters over the global economic outlook have weighed on soft commodities in recent weeks.
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