Forexpros – U.S. soft futures were up during early U.S. morning hours on Monday, with sugar futures advancing to trade close to a three-week high on the back of adverse weather conditions in top grower Brazil.
Meanwhile, coffee and cotton futures came off the highs of the day as the initial relief which greeted news that Spain had secured a bailout for its banking sector gave way to concerns over the ongoing debt crisis in the euro zone.
Farm commodities rallied earlier after Spain’s Finance Minister Luis de Guindos said the European Union agreed to grant Madrid a loan of up to EUR100 billion, which the government will use to recapitalize the country’s ailing banking sector.
But investors remained jittery as details of the Spanish bailout agreement remained unclear, with the exact amount Spain is to receive still be decided, after the results of independent banking audits are published later this month.
Meanwhile, uncertainty over the outcome of a Greek general election on June 17, which could determine the course of the country’s future in the euro zone, also weighed.
Jitters over the global economic outlook have weighed on soft commodities in recent weeks.
On the ICE Futures U.S. Exchange, sugar futures for July delivery traded at USD0.2025 a pound, rallying 1.55%.
It earlier rose by as much as 1.85% to trade at a session high of USD0.2038. Prices touched a three-week high of USD0.2042 on June 7.
Sugar prices have gained more than 7.5% 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.
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 U.S. Department of Agriculture estimating the nation accounts for nearly 20% of global production and 39% of global sugar exports.
Strong demand on the physical market ahead of the Muslim fasting month of Ramadan lent further support.
Despite the recent gains, prices are down approximately 43% since hitting a three-decade high of USD0.3594 in February of last year.
Meanwhile, cotton futures for July delivery traded at USD0.7371 a pound, climbing 1.1%. It earlier rose by as much as 2.5% to trade at USD0.7433 a pound.
Cotton prices have been on an uptrend in recent sessions, gaining nearly 10% since slumping to USD0.6617 a pound on June 4, the lowest since October 2009.
Cotton’s short-term price volatility has mostly been dominated by speculative traders. The fiber surged last week, boosted in part by short covering after futures moved into oversold territory.
The fiber lost nearly 25% in May, as large hedge funds liquidated positions and speculators pushed prices lower amid concerns over the global economic outlook.
Cotton traders shifted their attention to Tuesday’s monthly supply and demand report from the U.S. Department of Agriculture, to gauge the strength of demand for U.S. supplies.
Elsewhere on the ICE Futures U.S. Exchange, Arabica coffee for July delivery traded at USD1.5605 a pound, gaining 0.55%. It earlier rose by as much as 1.85% to trade at a session high of USD1.5718.
Coffee prices plunged to as low as USD1.5437 a pound on June 7, the lowest since mid-2010.
Coffee pushed higher after market participants returned to the market to seek cheap valuations after moving into ‘oversold’ territory.
Coffee prices have been under pressure in recent months, losing nearly 34% 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.
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