Arabica coffee rallies on short-covering

Arabica coffee futures on ICE jumped nearly 3 percent on Monday, in a short-covering rally spurred by data showing speculators sharply increased their selling at low levels last week and a bullish move in options. Raw sugar futures rose in thin volume on follow-through buying from the prior session's surge of more than 4 percent on rising global deficit forecasts. Cocoa was little changed ahead of European grind data due on Tuesday.
Arabica coffee futures rose for the fourth straight session, in part spurred by a large number of out-of-the-money August calls that were exercised, an unusual move that lead to short-covering, traders said. Also supportive was data released late on Friday showing that speculators were the most bearish they have been since December 2013, having sold heavily as prices fell to their lowest since January 2014.
September arabica futures settled up 2.55 cents, or 2 percent, at $1.288 per lb, after rising 2.7 percent to $1.297. September robustas closed up $15, or 0.9 percent, at $1,738 a tonne. Raw sugar extended Friday's rally while white sugar fell as dealers awaited the expiry of the August futures contract on Thursday. Traders said they expected a small delivery against the expiry, and it was likely to include Brazilian sugar.
One London broker expressed surprise at the extent of Friday's rally, given the presence of large stocks and concerns over the outlook for demand. October raws settled up 0.15 cent, or 1.2 percent, at 12.56 cents a lb, while August white sugar ended down $1.10, or 0.3 percent, at $373.90 a tonne.
Cocoa futures were steady ahead of European grind data set for release on Tuesday and North American on Thursday. "People are nervous about the grinds coming this week," one London-based broker said. The data is likely to show a fall of between 1 percent and 5 percent in Europe and a drop of 3 percent to 10 percent in North America, traders said.
Cocoa grinding in Malaysia fell 29.9 percent in the second quarter from a year earlier. September London cocoa finished down 3 pounds, or 0.1 percent, at 2,206 pounds a tonne, having touched the highest since March 2011 at 2,211 pounds on Friday. September New York cocoa closed up $2, or 0.1 percent, at $3,305 a tonne, near last month's nine-month peak.