Robusta coffee futures fell to a 3-month low on Monday on selling by system funds before roaster buying trimmed losses, dealers said. Cocoa futures rose to a 2-month high as the market broke out of its recent tight range boosted by fund buying in New York while white sugar ended lower on options-related selling.
Dealers said robusta coffee prices fell sharply in early trade when a break below last week's low of $1,773, basis January, triggered a wave of selling by system funds. January dipped to $1,711 a tonne, its lowest level since August 31, before staging a partial recovery to end down $50 at $1,753.
"Once that initial flurry was out of the way we started to get roaster buying coming in," one dealer said. Dealers noted the robusta market's weakness was in contrast with New York's arabica market where prices have been supported recently by diminished prospects for top producer Brazil's crop.
Damage from irregular rains will likely leave Brazil's 2008/09 coffee crop at around 44 million 60-kg bags, according to agronomists at the Costa Rican Coffee Institute on Sunday.
Cocoa futures climbed to a 2-month peak aided by a sharp advance in New York with the market finally breaking out of its recent narrow trading range. March ended 18 pounds up at 997 pounds, its highest level since October 2. Dealers said the market's strength was driven by fund buying in New York with the advance gathering momentum with the breach of the key $2,000 level, basis March New York.
They noted, however, that producer selling continued to overhang the market. "Cocoa is coming out of origin every day so there is obviously selling in the market," one dealer said.
Cocoa arrivals at ports in Ivory Coast reached around 478,000 tonnes between October 1 and December 2, compared with 352,439 tonnes in the same period a year ago, exporters estimated on Monday. Dealers said news a threatened strike in Ivory Coast had been postponed was largely shrugged off. "I think everyone is waiting until something actually happens. Then you might see a reaction," one dealer said.
Cocoa farmers and industry officials delayed strikes scheduled for Monday and Tuesday, postponing any disruption to exports at least until later this week, union officials said on Monday. White sugar futures finished slightly lower on selling linked to sales of put options but remained well within its recent range,
March ended down $0.70 at $287.00 a tonne. "The volume is generated by one operator selling cheap options," one dealer said, adding implied volatilities on the options were much lower than normal.
Sugar has been stuck in a narrow range for the last 2-1/2 months with a prolonged downtrend losing momentum but the market struggling to stage any significant rally due to a massive global supply glut. Sugar prices are seen dribbling lower in 2008 as a world glut takes its toll, but a few wild cards such as Brazil's ethanol industry could skew where the market heads next.
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