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NEW YORK/LONDON: Arabica coffee futures on ICE ended nearly flat Friday after heavy trade in a volatile session, supported by drought-induced crop concerns in Brazil even as a forecast for rain there and technical dealings added pressure.
Cocoa markets on ICE Futures U.S. and Liffe rose to a 2-1/2-year high on expectations arrivals in the Ivory Coast will drop sharply. Raw sugar on ICE Futures U.S. were largely unchanged, paring earlier losses, with news awaited on whether India's Cabinet will take steps to encourage exports.
Volume was heavy in all three ICE soft commodities as dealers rolled out of March positions and into May contracts.
Volatile arabica coffee prices have risen sharply on concerns that hot, dry weather could curtail production in top grower Brazil, though local crop weather forecaster Somar said early Friday that rains will return to the country's center-south region after Feb. 17.
"Although the weather is looking better for coffee, some are already reporting damage to coffee due to the heat," said Hector Galvan, senior softs broker at RJO Futures in Chicago.
March arabica coffee futures on ICE settled down 0.05 cent, or 0.04 percent, at $1.3570 per lb, after trading in a wide 10-cent range from $1.3205 to $1.4275. Total open interest dipped by a slight 228 lots to 162,991 lots on Thursday, when the market abruptly slumped 5 percent after rising to a 9-month high at $1.4415.
Technical traders were seen buying after $1.32 proved to show strong support through $1.35.
"Between less-than-expected Vietnamese exports and now this dry weather, we've gone from (a) surplus and balance to perhaps a deficit in production, which is reason enough to take prices higher," said Jack Scoville, broker with Futures Price Group in Chicago.
Liffe May robusta coffee tumbled $78, or 4.2 percent, to close at $1,767 a tonne, closing below the May contract's 200-day moving average at $1,773 for the first time in two weeks.
Dealers said the market was weighed by a pick-up in selling out of top robusta producer Vietnam after the run-up in prices.
"They (Vietnamese sellers) are just hammering it at the moment. Around 1,800 (dollars per tonne) they are quite happy with the (Vietnamese) dong price," one dealer said.
May cocoa futures on Liffe closed up 19 pounds, or 1 percent, at 1,859 pounds ($3,041) a tonne, after reaching the highest level for the second position since September 2011 at 1,864 pounds ($3,050). ICE March cocoa futures settled up $36, or 1.2 percent, at $2,922 a tonne, after tapping a 2-1/2-year high at $2,937.
Cocoa exporters in top grower Ivory Coast predict port arrivals in February and March will drop to around half the levels seen during the same period last year, erasing much of the current advance in volumes compared to last season.
Dealers said the possibility of an El Nino weather pattern later this year could provide some support. El Nino has in the past been associated with adverse weather in West Africa.
SWEET NEWS AWAITED
Raw sugar futures on ICE eased with March closing down 0.12 cent, or 0.8 percent, at 15.73 cents per lb.
Dealers said the market was awaiting news on whether India will approve incentives to encourage raw sugar exports. India's food minister, K.V. Thomas, had said the cabinet may consider the proposal on Friday.
The possibility that India may provide incentives for exports have helped to stall a rally which took prices for the first position to a one-month peak of 16.38 cents on Tuesday.
"After prices ... broke out from the downward trend line, we were looking for prices to break above the resistance level of 16.58 before we agreed that there was a change in trend," Phillip Futures analyst Vanessa Tan said in a market note.
"Prices could not reach this level and posted a loss during the last session. This suggests that the downtrend could still be intact."
March white sugar futures on Liffe ended up 60 cents, or 0.1 percent, at $435.40 per tonne.
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