London robusta coffee futures finished higher on Thursday with the nearby premium soaring on concern about a short-term squeeze linked to nearby supply tightness ahead of the next Vietnamese crop, dealers said. Cocoa futures ended slightly higher as hedge selling pressure eased following a drop in prices to a one-month low while white sugar finished slightly down.
November robustas ended up $116 or about 6 percent at $2,065 a tonne after setting a contract high of $2,068. Its premium to January rose to $230 from around $145 on Wednesday and less than $100 late last week. Dealers said the rise came as speculation grew about a possible supply squeeze.
"Part of it is panic from roasters and traders but the biggest part is a mysterious player who is buying through his own screen. That is what I understand is happening," one dealer said. Dealers said the open position on November remained high at 68,563 lots on Thursday, far exceeding exchange stocks, which were last reported at 16,555 lots, as of September 24.
"There is a lot of coffee afloat and by mid-November I expect certified stocks to climb to 25,000 to 30,000 lots but if someone decides to take delivery of 40,000 lots then indeed there is not enough coffee," one dealer said.
Dealers said anyone taking delivery, however, would quickly face a sharp drop in value with top robusta producer Vietnam about to start harvesting a crop who most expected to be near record levels.
Bad weather may cut the new coffee crop by up to 8 percent in Vietnam's top growing province of Daklak, the provincial government said, but traders were doubtful of such a big impact on output. Cocoa futures finished higher with the market rebounding from an early one-month low. March ended 6 pounds higher at 951 pounds a tonne. The contract touched 941 pounds in early trade, the lowest level for the second position since September 13.
Dealers said hedge-selling pressure had eased following the drop in prices. West Africa crop have got off to a strong start but there is still some uncertainty about whether the flow of cocoa may tail off later in the season due to the impact of black pod disease, dealers added.
White sugar futures ended slightly lower with a large global supply surplus keeping the market on the defensive. Dealers noted, however, dry weather in Brazil helped to underpin the market. "Prices are supported by worries over dry weather in Brazil. The dry weather is super for the current harvest, but is stressing cane for next year's crop," one dealer said. December finished $1.00 lower at $274.20 a tonne.
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