Forexpros – U.S. soft futures were mostly higher during early U.S. morning trade on Thursday, with coffee and sugar prices consolidating above the lowest levels since August 2010, as funds readjusted positions in some month-end window dressing.
Elsewhere, cotton futures fell to the lowest level since early February 2010 as sustained concerns over Spain’s deteriorating financial situation and fading hopes for a large-scale stimulus package from China weighed.
However, broader market risk aversion kept a lid on gains across the soft commodities complex, as investors continued to monitor developments out of the euro zone.
Appetite for riskier assets weakened on Wednesday, as rising borrowing costs for Spain and Italy and indications that Greece’s anti-austerity parties were gaining in opinion polls ahead of elections in June underlined fears that the euro zone’s debt crisis was worsening.
Global equities and commodity markets have been rattled in recent weeks as fears over the possibility of a Greek exit from the euro zone and growing concerns Spain will be the next euro zone member to require a bailout dominated market sentiment.
For the month, sugar prices lost almost 8%, coffee futures tumbled nearly 11%, while cotton futures looked set to end the month with an almost 20% plunge.
On the ICE Futures U.S. Exchange, sugar futures for July delivery traded at USD0.1964 a pound, gaining 0.85%. It earlier rose by as much as 0.95% to trade at a session high of USD0.1966 a pound.
Prices touched USD0.1936 a pound on May 23, the lowest since August 27, 2010.
Sugar prices have been stuck in a tight range over the past five sessions, consolidating inside a new lower range, established last week after the market broke below the key technical level of USD0.2000 per pound.
Prices are expected to remain vulnerable in the near-term, pressured by a global surplus and the prospect of a large Brazilian harvest.
Swiss-based industry group Kingsman said earlier in the week that global prices of raw sugar will likely continue to slide in coming months as a weaker Brazilian real becomes the “biggest new factor” weighing on prices.
Sugar prices have been under pressure in recent weeks, losing nearly 26% since March 20, as increasing competition for U.S. exports and ample global supplies have been dominating sentiment.
The sugar market remains in a major bear trend. Prices are down approximately 45% since hitting a three-decade high of USD0.3594 in February of last year.
Elsewhere on the ICE Futures U.S. Exchange, Arabica coffee for July delivery traded at USD1.6425 a pound, adding 0.35%. It earlier rose by as much as 0.75% to trade at a daily high of USD1.6543 a pound.
Prices touched USD1.6240 a pound on Wednesday, the lowest since July 27, 2010.
Coffee prices have been on the decline in recent months, losing nearly 31% since mid-January as traders eyed a huge harvest in top grower Brazil and speculators pushed prices lower.
Analysts at Barclays Capital said earlier in the week that Arabica prices were likely to remain weak in the near-term due to expectations for an ample Brazilian harvest.
Brazil is the world’s largest producer and exporter of Arabica coffee.
Market participants said that coffee prices remain vulnerable to even steeper losses as hedge funds and large institutional investors liquidate long positions amid concerns over the global macroeconomic outlook.
Meanwhile, cotton futures for July delivery traded at USD0.7096 a pound, easing up 0.1%. The July contract traded in between a range of USD0.7170, the daily high and a session low of USD0.7071 a pound.
Prices touched USD0.7040 a pound on Wednesday, the lowest since early February 2010.
Cotton prices have been on downtrend for the most part of May, as traders remained jittery amid concerns over the outlook for the euro zone and the global economy.
Demand for cotton, as a non-food agricultural commodity, is seen as more closely linked to economic conditions and consumer sentiment than that for other farm crops.
Market talk in recent sessions that top consumer China may be selling some of its state reserves added to the bearish sentiment.
The U.S. is the world’s biggest exporter of cotton and the third largest producer of the fiber, trailing only China and India.
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.
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