Sugar vaults ahead of May expiry, cocoa at 2016 peaks

Raw sugar on ICE rallied nearly 6 percent on Friday, on last-minute dealings ahead of the May contract's expiry. The rally sharply narrowed the May-July spread, which on Thursday saw May at a record discount. Concern about production in India spurred short-covering. Cocoa prices rose to 2016 highs, after sources said small exporters in Ivory Coast have failed to deliver thousands of tonnes of beans due to poor quality.
London softs markets will be closed for a public holiday on Monday, when New York will open late at 1130 GMT. The sharply lower dollar helped support the softs complex. Raw sugar futures jumped. Though traders expected a modest delivery against Friday's May expiry, last minute futures buying surprised the market.
"It would appear someone has stepped up to take delivery or someone has changed their mind about delivering," said Michael McDougall, director of commodities for Societe Generale in New York. The delivery would be relatively small, as demand in the cash market has been strong recently, McDougall said. Traders said they expected Brazilian and possibly Argentine sugar to be sold against the contract.
"All the fundamental traders were short because the Unica numbers that came out were bearish," one US trader said. "It was a crowded short trade and I think the specs were able to start getting it to levels where people were uncomfortable with being short." Speculative buying also buoyed prices after the Indian government forecast lower production in 2016/17, the trader said. Technical signals exaggerated the day's gains, with July breaking through resistance at 16.09 cents per lb. May raw sugar settled up 0.84 cent, or 5.5 percent at 16.16 cents per lb. July raw sugar settled up 0.61 cent, or 3.9 percent, at 16.32 cents per lb. The May/July spread narrowed sharply to a 0.16 cent discount from a record 0.33 cent discount on Thursday.
August white sugar settled up $9.70, or 2.1 percent, at $467.40 per tonne. July arabica coffee futures settled up 0.55 cent, or 0.5 percent, at $1.215 per lb, up from Thursday's seven-week low. July robusta futures settled up $10, or 0.6 percent, at $1,588 per tonne. July London cocoa settled up 37 pounds, or 1.6 percent, at 2,316 pounds per tonne, after reaching the highest since early December at 2,319 pounds. July New York cocoa settled up $51, or 1.6 percent, at $3,233 per tonne, having touched a 2016 high of $3,240. It closed the month up 9.3 percent, its strongest since February 2015.