Arabica coffee futures climb on index fund buying

Arabica coffee futures on ICE rose to the highest level in almost six weeks on Tuesday boosted by index fund buying, dealers said. March arabica coffee rose 2.8 cents or 1.9 percent to $1.47 per lb by 1521 GMT after peaking at $1.4740, the highest level for the front month since December 1. "We've got index fund rebalancing happening this week and index funds have been net buyers of coffee," one dealer said, adding he believed the market was fair value at around $1.40 to $1.50 per lb.
Robusta coffee futures were also higher with March up $18 or 0.8 percent at $2,159 a tonne. Dealers noted the harvest in top robusta producer Vietnam was now about 90 percent complete. "It is quite small and there are certain issues about quality," one dealer said, adding industry buying was also helping to support robusta prices.
Cocoa was slightly higher, consolidating after falling sharply on Monday on news that an uprising in top grower Ivory Coast had ended after the government reached an agreement with disgruntled soldiers. March New York cocoa was $12 or 0.55 percent higher at $2,196 per tonne. Prices had risen to a peak of $2,291 on Friday as the mutiny spread to the Ivory Coast's cocoa producing areas.
Dealers said the market remained on the defensive with crop prospects in Ivory Coast remaining favourable. "Some people are talking about a record crop, industry cover is high and origins were mainly abstaining (for selling) during December. There is a reason why funds are net short," one London dealer said. The prospect of a bumper crop in Ivory Coast has helped to fuel widespread expectations that there will be a global surplus in the 2016/17 season of around 150,000 to 225,000 tonnes.
March London cocoa was up 7 pounds or 0.4 percent at 1,788 pounds a tonne. Raw sugar prices were lower with March down 0.13 cents or 0.6 percent at 20.29 cents a lb. Dealers said a strong post-Christmas rally in the futures market may have been overdone with prices in the physical market failing to climb to the same extent. March white sugar was down $5.30 or 1.0 percent at $532.90 per tonne.