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Tuesday, August 25, 1998

Soft commodities to remain quiet 

Andrew Tarnowski  
LONDON, Aug 24: Soft commodities futures prices are unlikely to move dramatically this week, traders and analysts said.

Cocoa is caught in a tight range and generating little interest, coffee is in a downtrend but within a range that has held since early July, and sugar could continue a steady slide, they said.

Traders said white sugar futures may head lower after a technically-driven break on Friday that drove front October below its July 9 low of $243.50.

October, which had been trading in a $245 to $255 range, could now soon test the June 15 low of $236, traders said. October has been under pressure, especially with abundant Brazilian supplies searching for alternative homes following Russia's withdrawal from the market after sharp sugar tax increases on August 1.

Another huge beet crop is expected in the European Union, which starts harvesting in late September, and this will put further pressure on values. Lawrence Eagles, head of research for global futures trader GNI Ltd, said coffee could move sharply lower if it breaks through current support.

"There's a little bit of an uptrend forming but if we break Friday's lows, then it's going to look a little bit negative on the charts and we will be looking at support on November at $1,554.

"However, if we hit $1,520 then it's the bottom of the deep blue sea."

Fundamentally roasters feel prices will be cheaper over the coming months so they are holding back and buying on a hand-to-mouth basis. Demand is also low because it's the summer and with many traders on holiday, the market is quiet. Traders said the absence of funds and speculators was the cause of cocoa's lacklustre performance in recent weeks, and analysts said there was nothing in sight that could bring them back into the market in the immediate future.

Second month December barely moved last week. It traded in a 1,070-1,090 range and ended the week at 1,081 after starting at 1,088. Volume was extremely light, with most of the trade in switches and crosses.

Analysts said uncertainty about the development of the 1988/89 Ivorian harvest was keeping the market quiet.

"It's lack of any fundamental information to change anything. It just seems to be really boring at the moment and I expect the funds are looking at it in that light," an analyst said. "There's nothing to make them change their positions as there's no information."

However, he said Ivorian liberalisation was now a big issue and could have a bearish impact. "If farmgate prices go up (with liberalisation) you would expect even more production to come out of there."

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.


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