Liffe cocoa prices were steady on Friday, remaining trapped within a tight range, as dealers awaited the latest grind data. Sugar prices were slightly lower, while robusta coffee was also down in thin trading, with ICE markets closed for Independence Day. Cocoa prices hovered near a 3-year high, inside a roughly 100-pound range that has been traded since May, as dealers focused on the possibility the market was heading for a third consecutive annual deficit in 2014/15. Liffe September cocoa was unchanged at 1,927 pounds a tonne at 1340 GMT.
"A lot of people perceive the market as over-extended," a European trader said. Europe's second quarter cocoa grind, due to be published on July 10, is expected little changed to up 2 percent compared with the same period a year ago. Traders said weak cocoa powder demand and global overcapacity are weighing on factory margins. "If you look at market levels for powder and the market level for butter and you make the combination out of that, for sure we're not making any money," said a second trader.
"I think for Q3 it could be even worse." White sugar prices were lower with dealers predicting weak demand on the physical market could lead to a small delivery against the August contract which expires on July 16. "The delivery in London against August may not be large," said Nick Penney of brokerage Sucden Financial.
"Open interest in August London, however, is still over 21,000 lots so there may be more volatility in the spread to come as it becomes a trade game." Liffe August white sugar eased $2.90, or 0.6 percent, to $467.20 a tonne. August traded at a $1.10 per tonne discount to October. In robusta coffee, benchmark September Liffe futures traded down $6 or 0.3 percent at $2,062 per tonne, having hit a seven-week high of $2,085 on Thursday.
"London managed to make a new relative high yesterday. Much of this is being driven by the recent action in the front spreads, with September-November and November-January going from carry to a healthy backwardation in the space of a week," Volcafe, the Swiss-based coffee division of commodities house EDF Man, said in a note. Dealers said the premiums on the nearby contracts partly reflected low exchange-certified stocks which back the futures.
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