Cocoa hits multi-month lows, producer sales awaited

NEW YORK/LONDON: Cocoa futures hit multi-month lows on Wednesday with the market weighed by an improving outlook for W
06 Mar, 2013

 

Arabica coffee on ICE Futures US turned higher, consolidating in choppy dealings after the previous session's dramatic drop, while ICE raw sugar and Liffe white sugar were little changed as excess supplies kept a lid on both markets.

 

May cocoa on ICE settled down $17, or 0.8 percent, at $2,042 per tonne, after dipping to $2,038, the lowest level for the second month since June 2012. Total open inched up in the previous session by a slight 615 lots to 200,892 lots, the highest since Feb. 6, ICE data showed.

 

The Ivory Coast midcrop, which starts next month, "is starting to look quite good," said Nick Gentile, chief trader at Atlantic Capital Advisors in New Jersey.

 

"There's nothing bullish in cocoa right now."

 

Dealers said top producers Ivory Coast and Ghana were both out of the market at the moment but are likely to need to sell in the next few weeks, limiting the scope for rallies.

 

"The longer origin are not in the market, the more bearish it gets," one London broker said. "Any rally will be well sold into with specs front running origin selling."

 

Dealers said the weakness of the front month spread of Liffe, an indication that overall supplies are ample despite relatively low certified stocks, had contributed to the bearish mood in the market.

 

An improved mid-crop outlook in West Africa has also put downward pressure on prices.

 

Long liquidation by speculators also weighed on the market, while industry buying prevented deeper losses, dealers said.

 

Dealers said that while the weakness of the sterling pressured ICE cocoa futures, it helped to limit losses on Liffe with May, which closed down 1 pound at 1,390 pounds a tonne after earlier touching 1,382 pounds, the lowest level for the second month since April 2012.

 

Arabica coffee futures on ICE initially extended the previous session's losses but then nudged higher as the market consolidated. On Tuesday, the arabica market marked an outside reversal in a volatile move, first climbing to a one-month high and then tumbling around 4 percent.

 

"Coffee got its clock cleaned yesterday," Gentile said.

 

Total open interest jumped by 3,316 contracts on March 5, bringing it up to 167,363 contract, the highest since August 2010, exchange data showed.

 

ICE May arabica coffee settled up 0.10 cent, or 0.07 percent, at $1.4125 per lb.

 

Dealers said a favorable crop outlook in top producer Brazil had added to the bearish mood in a market which already appears oversupplied despite ongoing concerns about a severe outbreak of roya, or leaf rust in Central America and Mexico.

 

"There is a lot of supply around so I would expect the (downward) pressure to persist and prices could even fall below current values," F.O. Licht analyst Stefan Uhlenbrock said.

 

Uhlenbrock said the prospect of a possibly record "off-year" crop in Brazil this year should ensure adequate supplies.

 

"There is not a real threat that these problems in Central America will strain global coffee supply significantly," he said.

 

New York May coffee may keep falling to $1.3775 per lb, as indicted by its wave pattern and a Fibonacci projection analysis, according to Reuters market analyst Wang Tao.

 

Robusta coffee prices were little changed with the market underpinned by the rising demand for instant or soluble coffee, in emerging markets. Robustas are widely used in instant coffee.

 

May robusta coffee futures on Liffe rose $23, or 1.1 percent, to close at $2,113 a tonne.

 

Raw sugar futures on ICE were choppy but little changed with May closing up 0.01 cent at 18.20 cents a lb.

 

May white sugar on Liffe finished up $1.50, or 0.3 percent, at $518.20 a tonne.

Copyright Reuters, 2013

Read Comments