Arabica coffee futures on ICE turned higher in heavy volume on Monday, nearing a two-year high after roaster buying came in at the session lows and as data that showed commercial dealers had bought into last week's rally surprised traders. White sugar futures on Liffe tumbled in the biggest four-day drop in 2-1/2 years as the spot contract was set to expire on Tuesday. Raw sugar prices on ICE Futures US turned down, falling to the lowest level since February 28 as the May/July spread widened.
Cocoa futures on both Liffe and ICE were slightly lower. Though top coffee grower Brazil finally received decent rain in its parched coffee regions, many traders considered it was too little too late due to crop damage from a January-February drought, followed by below-average rain. Output remained uncertain just ahead of the main harvest. Benchmark ICE July arabica coffee futures closed up 3.85 cents, or 1.9 percent, at $2.0740 cents per lb. It rose as high as $2.1090 on Friday, its highest level since February 2012. Total volume exceeded 52,000 lots, more than double the 250-day average.
"You've had trade that's been buying back hedges as they can't afford margin calls and you've had roasters who have been just-in-case extending coverage and buying more," one US trader said, noting arabica futures' total open interest tumbled 2.9 percent to 159,916 lots on April 11. ICE data showed this was the lowest since February 4. ICE last raised coffee margins a month ago in its seventh hike since December as prices soared more than 80 percent to a two-year high on production concerns in Brazil.
After the market closed on Friday, US Commodity Futures Trading Commission data showed that speculators had cut their net long position as the futures market soared 12 percent, surprising traders. "People had expected that because the market had rallied so much that the funds would've bought and had a bigger position," the US trader said. "But instead it showed that it was more trade and commercial buying, against funds maybe doing some liquidation."
In Brazil, disruption of supply "comes on top of continued spread of coffee leaf rust in Central America as well as expectations for a return of El Nino conditions, which historically negatively impact global production", Goldman Sachs said in a market note. Expecting prices to remain volatile in the coming months, the investment bank raised its 3- and 12-month arabica price forecasts to $1.75 per lb from $1.30.
July robusta coffee on Liffe fell $8, or 0.4 percent, to end at $2,134 a tonne. White sugar futures on Liffe fell with the front month May tumbling $12.80, or 2.9 percent, to finish at $423.20 per tonne, the lowest since February 2. This comes ahead of its expiration on Tuesday. It has fallen around 8 percent in four straight sessions A small delivery of white sugar from Central America and Mexico is expected against the May expiration, with the widening May/August spread signalling slack demand to deliver to the tape.
Raw sugar futures on ICE changed direction and fell to a six-week low as the May/July spread widened to a 0.74 cent discount, the biggest since February 28, from 0.69 cent on Friday. May raws on ICE dropped 0.21 cent, or 1.3 percent, to settle at 16.59 cents a lb.
Cocoa futures on ICE were lower, with July closing down $3, or 0.1 percent, at $2,996 a tonne, as bean arrivals in top grower Ivory Coast remained strong and dealers awaited North American first-quarter grind data on Thursday. Estimates ranged narrowly from flat to up 1.2 percent. Liffe July cocoa futures ended down 6 pounds, or 0.3 percent, at 1,878 pounds a tonne.
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