Cocoa Falls as Heavy Selling Pressures Soft Commodity Prices

By Carolyn Cui Features Dow Jones Newswires

Soft commodities fell across the board Thursday, as commodities remained under heavy selling pressures due to tamed inflation forecasts around the world.

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Prices for cocoa, cotton, orange juice, coffee and sugar were all lower in early trading, reflecting weak sentiment among commodity investors in an environment where inflation remains soft despite years of central bank easing.

On Thursday, central banks in Brazil and Philippines cut their inflation forecasts, while a Bank of Japan official also expressed concerns over the weak growth of consumer prices.

Reduced outlook on inflation could hurt commodity prices as speculators, especially momentum-driven traders, tend to sell the commodities in hopes that their prices will continue to drop.

Cocoa futures for September fell 1.8% to $1,820 a ton, while raw-sugar futures continued to slide, down 0.3% to 13.02 cents a pound, on track to print the lowest settlement since February 2016. Cotton futures were down 1.6% to 67.11 cents a pound, while coffee and orange juice fell 1.6% and 1.4%, respectively, to $1.2775 a pound and $1.2030 a pound.

"The funds are transparently heavily short but clearly in the money with the 'winds at their backs' as still we have a conducive environment to be short commodities," Tom Kujawa, co-head of softs department at Sucden Financial Research, said in a note to clients.

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In the cocoa market, computer-driven traders added more short positions on Thursday, said Michael Kerensky, a trader at R. J. O'Brien & Associates.

But lower cocoa prices also drew some buying from commercials, as a few global chocolate companies came in and bought cocoa and sugar, he said.

"These companies believe that with the prices this low in each commodity it is smart to start locking in these low prices that have not been seen in a long time," he said.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

June 22, 2017 12:18 ET (16:18 GMT)