NEW YORK/LONDON: Arabica coffee futures on ICE fell in thin dealings on Wednesday, as investors took profit from the previous session's five percent surge, while cocoa rose on commercial buying.
Raw sugar contracts on ICE Futures U.S. were also firm but well off session highs following bearish output data from top grower Brazil, while traders focused on the May contract expiry later in the day.
July arabica coffee futures on ICE finished down 6.05 cents, or 2.9 percent, at $2.0585 per lb, after falling to $2.02. The second-position contract closed the month up 14.4 percent.
The day's fall came after Tuesday's volatile session which saw a wide 18 cents and included a late-day rally on concern about cold weather in No. 1 coffee producer Brazil. The move marked an outside reversal higher, a technically bullish signal, but as weather fears subsided early Wednesday, profit-taking weighed on the market, dealers said.
"Temperatures and forecasts were nowhere near frost conditions. The knee-jerk reaction was incredible," said James Cordier, founder and president of Liberty Trading Group in Tampa, Florida.
Arabica futures have been highly volatile since the end of January when a drought in Brazil's growing region raised production concerns. The market remained near the highest level in more than two years reached on April 23 at $2.19 per lb, a 93 percent rise from the end of 2013 as the extent of crop losses remains unclear.
July robusta coffee futures on Liffe rose $29, or 1.4 percent, to settle at $2,168 a tonne, adjusting to Tuesday's late surge in prices on ICE arabicas after the London-based market had shut.
Cocoa futures rallied, taking back losses from the past week. ICE July settled up $29, or 1 percent, at $2,980 a tonne after soaring to $3,018. Liffe July closed up 7 pounds, or 0.4 percent, at 1,848 pounds a tonne.
"We sold off towards our support levels the last day or two and commercials find that's an attractive price and that's why we're bouncing today," Cordier said.
EL NINO THREAT
An El Nino weather event, which may develop around the middle of the year, could be supportive for cocoa prices as it could hurt output in West Africa and Indonesia.
"We believe that the uptrend in cocoa prices could resume, largely driven by speculative traders who continue to hold significant long positions," ABN-AMRO Group Economics said in a commodity outlook report Wednesday.
Raw sugar futures on ICE rose with May closing up 0.20 cent, or 1.2 percent, at 17.24 cents a lb, a 0.48-cent discount to the July contract. The contract will expire later in the day. Open interest fell by 5,561 lots to 19,945 lots on Tuesday.
Nick Penney, senior trader at Sucden Financial, said in an early market note that a delivery of around 400,000 to 500,000 tonnes of sugar was expected, mainly out of ports in north-east Brazil and Central America. As thin trading progressed, others estimated possibly as high as 800,000 tonnes.
The most-active July contract ended up 0.15 cent, or 0.9 percent, at 17.72 cents per lb.
Dealers said the market was underpinned by the prospect that Brazilian exports may fall in the 2014/15 season as the earlier drought prevents the cane crop reaching its full potential. But the market pared gains as Unica, a Brazilian cane industry association, stated that cane mills in the country's center-south have produced 538,800 tonnes of sugar so far in the 2014/15 season, more than double the 245,100 tonnes produced in the same period a year earlier.
Dealers said they were also monitoring whether an El Nino weather event develops, potentially leading to more rain in Brazil that could further disrupt production.
August white sugar futures on Liffe climbed $3.80, or 0.8 percent, to $477.20 per tonne.
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