Cocoa futures in London ended slightly lower on Thursday as profit-taking helped to stall the market's advance which had earlier taken prices to the highest levels in more than 23 years. Arabica coffee prices on ICE rose to a two-month peak while sugar eased on investor selling.
May cocoa in London ended 6 pounds lower at 1,949 pounds a tonne after touching 1,970 pounds, the highest level for the benchmark second month since March 1985. Dealers said the rise had been fuelled by a weak pound and concerns about crops in Ivory Coast and Ghana but the market could now be set for a period of consolidation.
"Some form of consolidation of the gains should be expected in the sessions to come although for the time being it would be seen as unwise to go against what is a technically and fundamentally strongly supported trend," brokers Sucden UK said in a daily cocoa market report. March cocoa on ICE settled $22 lower at $2,580 a tonne.
There was also some concern, however, that demand may be beginning to decline due to the global economic downturn with a clearer picture not expected to emerge until first quarter grind figures are released in early April. "You have got a market which is taking off on supply concerns but I don't think we have really started to address the demand concerns. There may well be some demand erosion going on," one dealer said.
Cocoa arrivals in the port city of Lagos, Nigeria's main export route, fell by 13 percent to 31,000 tonnes in December compared with the same period of last season, an average of estimates by major exporters showed on Thursday. Arabica coffee futures on ICE rose to the highest levels in more than two months, boosted by technically driven buying.
Dealers said the market's strong performance on Wednesday, when it rebounded strongly after testing but failing to convincingly breach support at the bottom of its current range, helped to spark further buying on Thursday. March arabicas stood 2.05 cents firmer at $1.1960 at 1736 GMT after peaking at $1.1990, the highest level for the contract since November 10, 2008. The contract dipped to a low of $1.1270 on Wednesday but rallied to finish at $1.1755 in what was seen as a strong technical performance.
Robusta coffee futures in London also rose as strengthening nearby premiums prompted some short covering. Dealers noted March has traded at a premium of up to $26 to May, up from level money earlier in the week. January is commanding a premium of more than $400 to March, boosted by concern about whether there are sufficient supplies of tenderable coffee available to deliver. March robustas settled $28 higher at $1,708 a tonne.
Raw sugar futures were lower, weakened partly by a sharp setback in crude oil prices after a US government report showed a much larger than expected jump in fuel stocks. March raw sugar futures on ICE fell 0.33 cent to 12.27 cents a lb but remained well above levels traded last week when prices dipped as low as 11.32 cents. March whites in London ended $4.00 lower at $345.00 per tonne.
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