Liffe December cocoa ended 23 pounds higher at 1,954 pounds a tonne on Tuesday, supported by industry buying but limited by improving crop prospects in West Africa. Dealers also noted the nearby premium had disappeared as concern about tightness in available supplies to tender against September diminished. Liffe October white sugar futures ended $1.40 higher at $578.70 per tonne.
Market tracked rebounds in other commodities and was underpinned by scaled-back output prospects in several countries including Russia and Pakistan. Liffe November robusta coffee settled $4 higher at $1,641 per tonne, underpinned by declining exchange stocks. Port congestion in top exporter Brazil also added to supply concerns.
"Is Brazil going to be able to get the production growth to meet global demand? There are doubts, with the infrastructure problems we've seen this year," said Jake Weatherall, a London-based soft commodities trader with Rabobank. Dealers said a favourable crop outlook in West Africa was likely to keep the market on the defensive.
"Clearly, for the short-term at least, the more bearishly-inclined have the upper hand (on cocoa), driven partly on doubt by the flow of news stories and comments forecasting a much better 2010-11 crop out of Ivory Coast," ABN Amro said in a report issued on Tuesday. Cocoa prices in London followed a similar pattern with December up 11 pounds at 1,942 pounds a tonne after earlier hitting an 11-month low of 1,915 pounds.
September options expired around midday on Tuesday, with late interest centred around the 1,950 pound strike price, and the front month showed further weakness later in the session. "Typically options expires stick to a particular strike and it gravitated towards 1,950 pounds a tonne," a London-based broker said.
"Given the context of declining certified exchange stocks in the US (arabica) and London (robusta) and the remaining possibility that a double-dip recession may be eluded (and thus demand growth remain around one to two percent), then the recent rise in coffee prices may look fairly mild by this time next year," ABN Amro said. ABN Amro, however, raised on Tuesday its forecast for global robusta coffee production in 2010/11, widening an anticipated surplus.
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