Coffee futures sank roughly 4 percent on Monday, on selling related to the strong dollar after Japan sold the yen for the second time in less than three months, while sugar and cocoa also dropped.
"We're in a liquidation phase because of headline news and lower stock values. When there's caution, there's usually selling," said James Cordier, senior analyst at brokerage optionsellers.com in Florida.
Coffee "is very fast to come down with any type of fear," Cordier said. World equities fell as commodity shares sank on a sharply stronger dollar following Japan's intervention to weaken the yen and there were doubts about the plan to stem the euro zone's debt crisis.
Additionally, the US futures broker MF Global, filed for bankruptcy on Monday, and exchanges limited it to liquidation-only trading. Front month, December arabica coffee futures sank 8.20 cents, or 3.5 percent, to end at $2.2695 per lb, while January robusta coffee on Liffe dropped $77, or 4.1 percent, settling at $1,822 a tonne.
The stronger US dollar attracts selling of dollar-traded commodities such as coffee, by investors who hold other currencies. "The stronger dollar is a common theme across the softs," said James Kirkup, head of sugar brokerage at ABN AMRO Markets (UK) Ltd.
Arabica coffee futures on ICE extended losses with other commodities under pressure from the stronger dollar, and possibly due to the impact of producer sales. "Fundamentally, globally, the luxury items are going to face a little bit of pressure because the economies are slowing, especially in Europe," Cordier said.
Raw sugar futures trickled lower on sales by small speculators as the trade digested the implications of brokerage MF Global's bankruptcy filing. ICE March raw sugar futures eased 0.38 cent, or 1.5 percent, to close at 25.77 cents per lbs.
"Sugar's in a holding pattern," said Alex Oliveira, senior sugar analyst at brokerage Newedge USA. "it's not doing anything extraordinary."Analysts said dips in the market approaching 25 cents or below are occasions for importers to book some orders. The cash interest then dries up when the market goes past 28 cents, basis March.
Expectations of lower-than-expected output from Brazil, with mills now beginning to end their crush, and potential cuts to production estimates for other key producers including India underpinned sugar futures.
Dealers eyed possible delays in sugar deliveries from number 2 exporter Thailand due to floods. "There are concerns over when supplies from the Thai crush will hit the market," said Keith Flury, a senior soft commodities analyst with Rabobank. December white sugar futures on Liffe closed down $12.50, or 1.8 percent, at $689.60 per tonne.
COCOA SUPPLIES
Cocoa futures on ICE eased, weighed by the firmer dollar and by ample supplies in West Africa, the world's top growing region, although some dealers noted concerns over slow cocoa arrivals from leading grower Ivory Coast, which limited losses.
ICE December cocoa closed down $52, or 1.9 percent, at $2,696 a tonne, while London December cocoa finished down 27 pounds, or 1.6 percent, at 1,673 pounds per tonne.