Forexpros – U.S. softs futures came under heavy selling pressure during early U.S. morning trade on Wednesday, with sugar, coffee and cotton prices all dropping to multi-year lows as investors cut their exposure to riskier assets amid growing fears over a possible Greece exit from the euro zone.
Farm commodities were affected by broader market risk aversion as fears over a possible Greek exit from the euro zone intensified after former Greek Prime Minister Lucas Papademos warned that preparations for such an event were being considered.
Meanwhile, investors eyed a meeting of European leaders in Brussels later in the day, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
The ongoing Greece fears weighed heavily on the euro, which hit a 21-month low against the U.S. dollar. The dollar index, meanwhile hit its highest level since September 2010 earlier in the session.
A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.
On the ICE Futures U.S. Exchange, sugar futures for July delivery traded at USD0.1950 a pound, plunging 2.05%. It earlier fell by as much as 2.2% to trade at USD0.1946 a pound, the lowest since August 27, 2010.
Sugar’s losses came after breaking below the key support level of USD0.2000 in the previous session, accelerating losses amid bearish chart signals. Heavy fund selling and speculative selling further weighed on the commodity.
According to technical traders, the next level of support is seen close to the USD0.1920-level.
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.
Market participants noted that 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 USD1.7143 a pound, tumbling 1.45%. It earlier fell by as much as 1.7% to trade at USD1.7122 a pound, the lowest since August 27, 2010.
Brazil-based industry group Cooxupe said that rainfall is delaying the start of harvesting in Brazil’s coffee belt, but a forecast for drier weather should enable farmers to start gathering the world’s biggest crop within days.
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 USD0.7339 a pound, retreating 1.5%. It earlier fell by as much as 1.95% to trade at USD72.22 a pound, the lowest since February 2010.
Cotton prices came under pressure from broader market risk aversion and concerns over the health of 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.
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.
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