ICE arabica coffee futures turned higher on Tuesday as meteorologists continued to call for possible frost on the fringes of the coffee belt in top grower Brazil, while raw sugar fell slightly as dealers monitored the cold, wet weather there. Cocoa futures edged up on follow-through support, dealers said.
Potentially crop-damaging frost that some forecasters had been expecting in the southern region of Brazil's coffee belt early on Tuesday did not materialise, initially easing supply concerns, dealers said. But forecasters said frost was still possible in the southern fringes of the coffee belt.
"(Some dealers were) let down that there wasn't a big frost. Guys who were short are putting back their positions now that there won't be a big event," one US dealer said, referring to early market weakness, adding that the continued risk of frost is in areas that produce only a small amount of coffee.
ICE September arabicas finished up 0.80 cent, or 0.6 percent, at $1.2610 per lb. "It will be quite cold and there is risk of some frost formation between northern Parana and southern Sao Paulo, where temperatures range between 0 and 3C (32 F-37 F)," Brazilian meteorologist Somar said in a report. "If you take the view that there won't be frost, you will be inclined to take advantage of the market at this level and sell," one coffee futures broker said.
Another broker said, "When this weather story goes away, fundamentally there will still be lots of arabica coffee around. There is every likelihood that we will see new price lows." Goldman Sachs said in a report late on Monday that expectations for a global coffee surplus 2013/14 will bring stocks to a five-year high. The investment bank once again lowered its three- to 12-month price forecast, from $1.45/lb to $1.30.
"Potential for prices to rebound from their current levels include weather risks in Brazil, the potential for further cuts to Central American production, and short-covering flows of near-record short net speculative positions," the report said. Liffe September robusta coffee fell $13, or 0.7 percent, to settle at $1,931 a tonne. October raw sugar on ICE turned lower, closing down 0.06 cent, or 0.4 percent, at 16.34 cents per lb, within sight of last week's three-year low for the front month of 15.93 cents.
Sugar traders awaited further weather developments in cane-growing areas in central-southern Brazil. October white sugar on Liffe settled up $3.00, or 0.6 percent, at $475.00 a tonne. September cocoa futures on ICE rose $11, or 0.5 percent, to end at $2,359 a tonne. The contract peaked at $2,377 on Friday, the highest level for the front month since June 12. December cocoa in London firmed 7 pounds, or 0.4 percent, to settle at 1,589 pounds a tonne.
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