Cocoa futures on ICE and Liffe rallied in heavy volume Monday on investor short-covering that pushed the nearby London contract to a premium, while raw sugar inched higher in a choppy session after hitting resistance. Arabica coffee on ICE Futures US dropped on late-day selling, while Liffe robusta coffee was little changed in range bound trading after hitting a nine-week low last week.
The Thomson Reuters-Jefferies CRB index, a benchmark for global commodities made up of 19 markets, climbed 0.2 percent, rising for the first time in six days as crude oil futures inched higher. The short-covering gains in cocoa futures caused the structure on Liffe to move into backwardation when the nearby May contract briefly moved to a premium as high as 10 pounds per tonne versus the July contract.
"The May/July London spread is trading at a small premium, so that gets things going to the upside a little bit," said one veteran US cocoa dealer. The move was based on technical levels rather than fundamentals as the market revealed buy-stops after breaking above previous session highs, dealers said.
Liffe July cocoa futures gained 35 pounds, or 2.4 percent, to end at 1,471 pounds a tonne. The May/July spread closed at a 2-pound premium, versus a 5-pound discount in the previous session. This is the first time the spot contract has held a premium to the second position since January.
May cocoa on ICE jumped $53, or 2.5 percent, to settle at $2,185 a tonne. Spreading boosted volume as dealers said it was the second day of the Goldman Sachs roll, with total volume exceeding 53,000 lots, more than double the 250-day average, preliminary Thomson Reuters data showed. Gains on both markets should be limited as selling from the world's top growers, Ivory Coast and Ghana, is expected. "Ivory Coast and Ghana still have plenty of forward selling to do, and as sales take place, this should put a lid on the market," one London-based cocoa futures dealer said.
Chocolate and cocoa product maker Barry Callebaut expects cocoa bean prices to remain stable or fall slightly in the near term, the firm's chief financial officer told Reuters on Monday. Raw sugar futures on ICE rallied earlier on short-covering in reaction to data released late on Friday showing speculators increased their net short position by 60 percent in the week to April 2, to the biggest on record, dealers said.
The market turned lower after attracting producer and trade selling, dealers said. "The market can't get any momentum. The funds are short but we'll have to break resistance levels to be able to uncover those shorts," said Michael McDougall, a vice president with brokerage Newedge in New York.
May raw sugar futures rose 0.05 cent, or 0.3 percent, to end at 17.70 cents a lb. Total volume was heavy at about 131,000 contracts, up 35 percent from the 250-day average, preliminary data showed. The contract remained within sight of a more than 2-1/2 year low, pressured by expectations of surpluses. It dipped to 17.47 cents on April 3, the lowest since July 2010.
"The reason for the recent weakness is the overwhelmingly bearish medium/long-term statistical picture, and funds will feel justified in being this short," Nick Penney of brokerage Sucden Financial said, referring to the global sugar surplus. Egyptian state buyer Sugar and Integrated Industries Co (SIIC) bought 50,000 tonnes of raw sugar in a tender for June arrival, European traders said on Monday.
May white sugar on Liffe was up $4.80, or 1 percent, to finish at $509.30 a tonne. ICE May arabica coffee futures dropped 4.25 cents, or 3 percent, to close at $1.3590 per lb, not far off a 33-month low of $1.3405 per lb, basis second month, touched on March 18, due to expectations of an abundant off-year crop in top producer Brazil. Total volume neared 58,000 lots, the highest in two months, preliminary Thomson Reuters and ICE data showed. May/July spreading lifted volume, dealers said. July robusta coffee futures on Liffe rose $1 to settle at $2,055 a tonne.
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