Cocoa futures ended 2011 down around 30 percent on Friday, while sugar dropped more than 20 percent and coffee also showed a weak performance, after a year of worries over the global economic outlook spilled into the softs complex.
The markets will be closed on Monday for the New Year holiday and will reopen on Tuesday.
ICE cocoa futures settled firm on the day, in thin holiday dealings, lifted by the firm sterling and higher commodity complex.
ICE March cocoa settled the day up $26 at $2,109 per tonne, closing the year down 30.5 percent, the spot contract's biggest annual drop in 12 years. It was one of the worst performers on the CRB, pressured by abundant West African supplies.
London May cocoa closed 15 pounds higher at 1,397 pounds a tonne. The second month contract lost 31 percent of its value during 2011.
“Demand will come back on line in anticipation of the Easter buying season,” said Keith Flury, senior soft commodities analyst with Rabobank, adding he expected cocoa prices to move sideways in early 2012, with industry buying kicking in.
SUGAR STUMBLES IN 2011
Raw sugar futures ended 2011 as one of the weakest performing commodities of the year on the Thomson Reuters-Jefferies CRB index, tumbling 27.5 percent on investor liquidation and increased supplies.
The market scaled a 30-year peak over 36 cents a lb in the spring, but then fell as supplies swelled from top grower/exporter Brazil and No. 2 producer India.
“It seems its fundamentals did an about-face,” said The Price Group's senior analyst Jack Scoville. “We've seen one of the big guys go from being an importer to being an exporter of sugar.”
India was a major importer of sugar in the 2010/11 season after weak annual monsoon rains caused damage in its sugar areas. In 2011/12, India could export up to 4 million tonnes of sugar.
“There are so many factors that are so fluid in this market,” said Scoville, adding there are question marks about demand for sugar with the wildcard provided by weather in producing countries.
ICE benchmark raw sugar futures closed the day lower on investor selling and book-squaring on the last trading day of 2011, pressured by big crops in the EU, Russia, Ukraine, India and Thailand.
ICE March raw sugar futures inched down 0.21 cent, or 0.9 percent, to close at 23.30 cents a lb. The fall outstripped forecasts. A Reuters poll of analysts and traders in July produced a median end-year raw sugar price of 24.10 cents.
Speculators increased their net short position in raw sugar futures and options in the week ended Dec. 27 to the biggest in four years, US Commodity Futures Trading Commission data showed post-market.
Speculators trimmed their net short position in coffee and cocoa.
Liffe March white sugar futures ended an abbreviated pre-holiday session down $2.60 at $602.00 per tonne. London front month white sugar fell 23 percent in 2011.
“I think sugar prices will go down in the New Year, but the downward correction will be tempered by concerns over the size of the Brazilian crop,” said Rabobank's Flury.
Some analysts think Brazil's crop may not be as large as in previous years due to low yields.
Arabica coffee futures on ICE also closed the day higher in holiday-thinned volumes but posted a modest loss for calendar year 2011.
Coffee's fundamentals are bullish going into 2012 due to weather-related problems in major producer Colombia that have led to smaller crop forecasts in the world's top grower of washed arabica beans, dealers said.
“Coffee, with its better fundamentals, is probably attracting a little bit of buying and not warranting any selling here,” said Sterling Smith, analyst with Country Hedging in Minnesota.
Flury said, however, that buyers seemed to be more willing to use Brazilian arabicas and robustas in blends, because of the limited availability of high quality Colombian coffee.
ICE March arabica futures closed up 2.60 cents, or 1.2 percent, at $2.2685 per lb, finishing the year down 5.7 percent after a weak performance in the second half of the year.
A Reuters poll of analysts and traders in July had produced a median end-year forecast of $2.60.
Macroeconomic concerns have the potential to drag on softs prices further in 2012 through their impact on currency.
“The underlying importance of the dollar is going to be a major factor,” Flury said.
Vietnamese coffee prices will stay firm as roasters replenish stocks, dealers said.
London March robusta coffee futures closed $3 higher at $1,810 per tonne, holding above Wednesday's two-week low of $1,792 per tonne, basis second month, pressured by a big harvest in top producer Vietnam.
London second-month robusta coffee finished 2011 down around 14 percent.
Flury said robustas could shave off another $100 a tonne in the first half of 2012 due to the pressure of big supplies. - Reuters