New York cocoa climbs on arbitrage buying

New York cocoa futures on ICE rose on Thursday, buoyed by arbitrage buying that sharply narrowed the May/July spread while the London May cocoa discount versus the July contract widened on the London market. May New York cocoa settled up $33, or 1.3 percent, at $2,508 per tonne. Despite the weaker British pound, traders said heavy arbitrage dealings that involved buying New York cocoa and selling London, buoyed US prices.
This caused the May discount to July to narrow to as much as $25 from $50 the prior session. Meanwhile the London May discount to July widened to as much as 40 pounds, the biggest for the contract. New York cocoa has held a rare premium over London since 2017. "A lot of people have this arbitrage on and it's hurting," one US trader said, adding that it appeared someone was "throwing in the towel."
May London cocoa settled up 3 pounds, or 0.2 percent, at 1,728 pounds per tonne. The markets shrugged off higher-than-expected bean arrivals in top grower Ivory Coast and expectations the country will produce a large crop. May raw sugar settled up 0.08 cent, or 0.7 percent, at 12.35 cents per lb, edging up from last week's 2-1/2-year low of 12.18 cents.
Dealers continued to keep a close watch on trade tensions between the United States and China. "One of the short-term potential bullish arguments is what would happen in a larger 'risk-off' environment which prompts speculators to reduce their positions," said James Liddiard of consultancy Agrilion, noting speculators would then be buying to cover a net short position.
August white sugar settled up 40 cents, or 0.1 percent, at $343.60 per tonne. The European Commission forecast on Thursday that white sugar production in the EU would fall 3 percent in 2018-19 to 20.4 million tonnes, after a nearly 25 percent rise the previous year when producers were encouraged by the end of quotas in the bloc.
May arabica coffee settled up 0.65 cent, or 0.6 percent, at $1.1755 per lb, buoyed by funds rolling forward short positions to the July contract. May robusta coffee settled up $4, or 0.2 percent, at $1,759 per tonne. Vietnam, the world's top robusta producer, is expected to export 100,000 to 140,000 tonnes (1.7 million to 2.3 million 60-kg bags) of coffee in April, traders said.