Liffe September robusta coffee ended off $44 at $2,252 a tonne on Wednesday after hitting a four-month low of $2,248 earlier in the session. Market weighed by system fund selling. Liffe September cocoa ended 17 pounds higher at 1,901 pounds a tonne. Weakness of sterling against the dollar helped to drive Liffe prices higher.
Liffe August white sugar closes $3.70 lower at $739.90 per tonne. Market consolidating just below a three month high set on Tuesday. Dealers noted the robusta futures market had diverged from the physical market in key producing countries where supplies are tight and premiums widening. Supplies from Vietnam and Indonesia were shipped to Europe earlier this year, attracted by a large premium on the May contract, shrinking the availability of supplies in the key robusta producing countries.
"The squeeze on May sucked all the coffee out of origin. All the coffee is now in Europe," one dealer said. "We've now got a two-tier market." Premiums for robusta skyrocketed in Asia as supply scarcity worsened, with Indonesian beans changing hands at $200 above London futures and Vietnamese coffee at $150 premiums, raising fears of more delays and even default, dealers said on Wednesday. "We do see the market remaining very tight for coffee," said Macquarie Securities commodity strategist Kona Haque.
Dealers noted sugar had outperformed many other commodities in the last few days, boosted by a slow start to Brazil's harvest and loading delays in Brazil and Thailand. The run-up may, however, have been slightly overdone with Brazil exporting sugar this month at a good pace despite the congestion. A firmer dollar also weighed.
F.O. Licht analyst Stefan Uhlenbrock on Wednesday forecast a substantial rise in global sugar output, reinforcing sentiment there will be a large global surplus. "We expect the sugar market to get into sizeable surplus next year and that should keep prices at bay," Macquarie's Haque said.
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