Arabica coffee futures on ICE hit a new 3-1/2 month peak on Thursday in its third consecutive day of strong gains amid speculative short-covering, coffee quality issues in top-grower Brazil and a stronger Brazilian real. July arabica coffee settled up 2.85 cents, or 2.9%, at $1.0235 per lb, after peaking at $1.0275, the highest since February 8.
The contract is on track to rise over 11% this month, placing it among the best-performing commodities in May. Last month, prices hit a 13-1/2-year low of 86.35 cents on expectations of oversupply, especially from Brazil. Prices are now getting support from short-covering as concerns about cold weather and crop quality in Brazil persist and the Brazilian real firms, dealers said.
"The shorts are running for cover," said one US trader. The trader was watching $1.0320, a 62% Fibonacci retracement of the monthly contract's early March highs and early May lows, as the next technical objective.
Brazil's 2019 coffee crop is seen producing less high-quality beans than the previous season because of a higher number of flowerings and more rains than normal, some industry experts said on Wednesday.
Brazil's real strengthened to its firmest against the US dollar in nearly three weeks, discouraging producer selling.
July robusta coffee settled up $44, or 3.1%, at $1,456 per tonne.
July raw sugar settled down 0.11 cent, or 0.9%, at 11.76 cents per lb.
Dealers were watching 12 cents as resistance.
"We still feel that another attempt will be made (in sugar) to test resistance at higher levels. The grain markets are also flushing out shorts as weather continues to hinder planting," said Sucden senior trader Nick Penney in a note. Brazilian mills are expected to cut cane allocation for sugar production in the 2019/20 crop, diverting more cane to ethanol output, Canaplan consultancy said.
Brazil's Copersucar, the world's largest sugar merchant, expects global sugar trade flow to reach an equilibrium between supply and demand in the second half of 2019, which could lead to a price recovery. August white sugar settled down $2, or 0.6%, at $323.90 per tonne.
July New York cocoa settled down $10, or 0.4%, at $2,428 per tonne, pulling away from the 10-month high of $2,478 matched earlier this week. Prices are on track to log their fourth consecutive month of gains, buoyed by signals of strong global demand, dealers said. July London cocoa settled up 13 pounds, or 0.7%, at 1,796 pounds per tonne.
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