Raw and white sugar futures surged to their loftiest close in two months Thursday on financial market hopes Greece will reach an agreement with its creditors, which knocked the dollar down against the euro. Cocoa also jumped on worries about West African supply even as players awaited important North American demand data later on Thursday.
Like many commodities, they were helped by the euro's rise to a two-week top against the dollar on continued optimism about Europe following a strong Spanish bond auction and anticipation of progress in negotiations over Greece's private sector debt.
"The market is concentrated on the fact that the dollar is at a two-week low against the euro. Also oil is a touch higher. All the softs are up," said Andrey Kryuchenkov, analyst at VTB Capital. London's March white sugar futures increased $11 or 1.7 percent to finish at $641.60 a tonne, the priciest settlement for the market since mid-November, Thomson Reuters data showed.
New York's March raw sugar contract rose 0.61 cent to end at 24.61 cents a lb, the highest settlement close for the market since the middle of November. Also supportive to sugar was speculation about the progress of the main centre-south Brazil cane crop. "With reports out pointing to a delayed harvest in Brazil due to weather and potential demand on raws out of Central America before March expiry, the trade seems to be cautiously covering shorts as the much touted surplus seems to be moving ever further out," said Nick Penney at broker Sucden Financial.
Volume is concentrated on the front spreads in New York, Penney added. Dealers expect a global 2011/12 sugar surplus of around 6 million to 9 million tonnes, but the surplus is not expected to hit the market for several months. Cocoa futures were supported by concerns over dry weather in top grower Ivory Coast. US cocoa was lifted by the dollar's weakness, particularly versus sterling. New York's March cocoa contract gained $55, or 2.4 percent on the day, to close at $2,320 per tonne. London's March cocoa futures added 34 pounds to finish at 1,537 pounds a tonne.
Kona Haque, head of agricultural research at Macquarie Securities, told a briefing that she believed fair value for benchmark ICE cocoa futures was $2,400 per tonne. She said she expected a 7,000 tonne global cocoa surplus in 2011/12. Dealers eyed the release of North American fourth-quarter grindings due at 4 pm EST (2100 GMT), which were expected to rise between 4 and 5 percent.
Last week, a lower-than-expected 1.8 percent rise in the European cocoa grind in the fourth quarter of 2011 triggered some concerns over the demand outlook. In coffee markets, dealers fretted over continuing slowness of export flow from top-robusta-producer Vietnam.
March robusta coffee on Liffe increased $29 to close at $1,878 a tonne. New York's March arabica futures was up 1.80 cents to end at $2.2665 a lb. "If people need coffee in Europe they're going to buy from the (warehouse) stocks, but for good quality Vietnamese coffee there's nothing in Europe," said a European dealer.
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