Cocoa crumbled Friday in its biggest daily percentage loss in nearly five months, extending its losses as fears over supplies from top grower Ivory Coast eased despite a disputed election.
Raw sugar reversed to settle higher and arabica coffee bounced to a strong settlement after a spurt of technical buying pushed the market higher. Both markets jumped in thin dealings.
The political strife in Ivory Coast appeared to be working its way closer toward a solution and violence failed to materialize despite the contested election result, with prices moving further away from Tuesday's four-month highs.
Ivory Coast President Laurent Gbagbo has dismissed talk of a possible resumption of war and said rival factions should negotiate a solution to a crisis provoked by a row over who won elections on Nov. 28.
"It's in part due to the fact there hasn't been a lot of instability in Ivory Coast. Granted, they're a long way off from sorting out their issues but the fact that there's not some widespread unrest is a positive," said Bill Raffety, senior analyst for futures brokerage Penson.
"I think people are unwinding some of the longs they had on, some of the outside protection they had on."
Benchmark March cocoa futures on ICE sank $123, or 4.1 percent, to settle at $2,887 per ton, the biggest daily percentage loss since July 19.
Liffe March cocoa dropped 93 pounds, or 4.7 percent, to close at 1,899 pounds per ton, the biggest daily drop since July 16.
"We're seeing hedge selling and a bit of speculative selling. It looks like the buying earlier in the week had been overdone," said a London cocoa futures dealer.
"The flows of cocoa are picking up," the dealer added, noting that Ivorian ports were open and there had been no reports of violence as the impasse dragged on.
INDIAN EXPORT POLICY
Raw sugar futures climbed in choppy dealings on thin investor sales as the lack of fresh leads kept the market range bound, with earlier pressure from the firmer dollar which was boosted by U.S. data that narrowed more than expected.
ICE March raw sugar rose 0.42 cent to close at 29.13 cents per pound.
"We suspect buy stops lie above 30 cents and sell stops below 27," said Nick Penney, a broker with Sucden Financial.
"Until values reach either of these points, we suspect volume will continue to drift off as the holiday season approaches."
Traders continued to wait for a final verdict by New Delhi on Indian sugar exports, which are believed to reach 500,000 tons in January.
"The decision by India remains vague — there's no definitive policy at the moment," said James Kirkup, head of sugar brokerage at ABN AMRO Markets (UK) Ltd.
Penney said, "Eyes are all on India while it ponders export policy, and we suspect that, other than macro factors, it is largely this that is the driver of the market at present."
Liffe March white sugar reversed early gains and closed down $4.70 to finish at $722.50 per ton.
ABN AMRO/VM Group forecast a global sugar deficit of 2.99 million tons for 2010/11 (October-September), while consultancy Kingsman SA revised its 2010/11 (April-March) global sugar balance to show a deficit to 370,000 tons.
ICE arabica futures surged in investor buying, after automatic buy orders were triggered around $2.0575, basis March, in light volume earlier.
ICE March arabicas surged 5.05 cents, or 2.5 percent, to settle at $2.0960 per pound. Liffe March robusta coffee futures closed up $4 at $1,908 a ton.
The firmness in arabicas was also related to the heavy rains in Colombia, the world's top producer of washed arabica beans.
Top coffee grower Brazil will finally be able to deliver a fraction of its arabica beans against the world's benchmark futures contract, ICE Futures U.S. said on Thursday, in a decision that provoked rivals to call for shunning the contract for fear it would drag down prices.
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