Liffe coffee moves up

Liffe September robusta coffee ended up $20 at $2,296 a tonne on Tuesday after hitting a four-month low of $2,261 earlier in the session. Market has technical support at around $2,246 a tonne. Liffe August white sugar closes $4.00 higher at $743.60 per tonne after setting a three-month peak for the front month of $747.80. Market pauses, consolidates gains, after rallying in recent sessions.
Liffe September cocoa ended 27 pounds higher at 1,884 pounds a tonne. Market buoyed by combination of short covering and expectations of 2011/12 global production falling short of demand.
"There's some profit taking, this is a small correction in the context of the move higher we've had in the last few sessions," a London-based broker said. Raw sugar prices have gained around 10 percent in value since Thursday, however this confounded some dealers who had been bearish on the market due to ample sugar supplies being expected as producers respond to historically high prices.
"The expected oversupply on the global sugar market of almost one million tonnes should prevent prices from returning to their highs of over 35 cents marked at the start of the year," Commerzbank said in a daily commodities note. Dealers said the market remained supported by the slow start to the Brazilian harvest, and loading delays in Brazil and Thailand. ICE arabica coffee futures consolidated, trading near a five-month low, under pressure from a weak technical outlook and top producer Brazil's harvest.
"It's no major surprise that there is strong bearish sentiment among technical traders when you look at arabica charts; futures broke below a potential neckline as well as breaking below the uptrend which has been in place since June 2010, both of these open the potential for downside targets below $2.29 a lb," Brenda Sullivan, technical analyst at Sucden said.
Second month arabica coffee futures peaked at a 34-year high in March, while front month futures peaked at a 14-year high, supported by a shortage of high quality beans. "With a (front month) peak at 306.25 cents per pound, almost as high as 1997's record 320.00, there is a possibility prices will plummet as they did in 1995 and 1998 after the last two massive spike highs," said Nicole Elliott, technical analyst at Mizuho.
"Bearish momentum is close to the strongest in a decade." Dealers said the technical outlook for the London robusta market differed from the weakness seen in New York arabicas. "London coffee futures on a second month continuation chart have not yet broken the uptrend from May 2010 and in fact could have some short term support near $2,246 a tonne, this is a potential channel line for today," Sullivan said.
"It's a mixture of short covering and new long positions to tackle next year's predicted deficit," a London-based dealer said. Forecasts for a large global surplus in 2010/11 have kept a lid on the market in recent months, but dealers are starting to look ahead to the 2011/12 season.