ICE raw sugar turns lower after Thursday rally, cocoa surges

NEW YORK/LONDON: Raw sugar futures on ICE closed slightly lower on Friday after short-covering dried up following the
08 Mar, 2013

 

Robusta coffee futures on Liffe jumped for the third straight day, reaching a five-month high, while arabica coffee futures on ICE Futures US were choppy and little changed.

 

May raw sugar futures turned lower, closing down 0.02 cent at 18.75 cents per lb, after climbing to 19.05 cents and running out of steam. Raw sugar futures this month have climbed further away from a 2-1/2 year low of 17.61 cents touched on Feb. 28 as a global supply surplus weighed on prices.

 

Total volume was heavy, around 180,000 lots, up sharply from the 250-day average for an entire session of 96,832 lots, preliminary Thomson Reuters data showed.

 

"Profit taking/short covering seems to be the explanation for the recent upsurge and talk of problems/strength in the spot market at origin," said Tom Kujawa of brokerage Sucden Financial.

 

Tight availability of raw sugar due to the inter-crop period in top producer Brazil supported prices before the market turned lower.

 

Dealers monitored logistical bottlenecks at Brazil's ports, where dock workers plan a 24-hour nationwide strike on March 19 because negotiations with the government over its plan to privatize hundreds of port terminals have yielded little progress, a union leader said.

 

The US Department of Agriculture increased its forecast for domestic sugar supplies in the 2012/13 marketing year on Friday, due to higher imports from neighboring Mexico as the sugar industry faces a global surplus for the third straight year.

 

ICE raw sugar futures fell 1.4 percent to a session low at 18.58 cents per lb over a 17-minute period after the data was released, though dealers contacted at the time did not believe there was any connection to the data.

 

The market has been bearish for months on abundant global supplies, but has recently been working its way higher after rebounding from the February low.

 

May white sugar on Liffe rose $1.50, or 0.3 percent, to close at $534.10 a tonne.

 

COCOA RALLIES

 

Cocoa futures trading on both Liffe and ICE surged on technical buy signals after the US market's outside reversal on Thursday, when it inched down to a nine-month low at $2,034 per tonne basis the second-position and then closed higher, above the previous session's high.

 

"(The) key reversal yesterday (is) attracting follow-through technical buying from an oversold position," said Stephen Platt, futures strategist with Archer Financial Services in Chicago.

 

"Longer term fundamentals (are) supportive given modest deficit forecast this year, which might get larger given improving economic prospects and increasing discretionary expenditures linked to rising equity markets and stabilization in Europe."

 

May cocoa on ICE rallied $58, or 2.8 percent, to settle at $2,120 per tonne. May cocoa on Liffe was up $40, or 2.9 percent, ending at 1,441 pounds per tonne.

 

"The market got a little short and is now having a bit of a short-covering backlash," a senior cocoa futures broker said.

 

Dealers said a combination of favorable weather aiding West Africa's mid crop development and lagging forward sales from top growers Ivory Coast and Ghana weighed on prices.

 

May robusta coffee futures on Liffe rose $27, or 1.3 percent, to end at $2,181 a tonne, the highest for the second position in five months, following through on the previous session's strong gain.

 

A drought in top-grower Vietnam has recently helped lift the market, dealers said.

 

Certified coffee stocks held in NYSE Liffe nominated warehouses rose to 125,820 tonnes as of March 4 from 113,090 tonnes on Feb. 18, exchange data showed.

 

ICE May arabica coffee turned higher in choppy dealings, finishing up 0.95 cent, or 0.7 percent, at $1.4405 per lb.

 

Hefty Brazilian supplies kept the market under pressure, before a big crop due to hit the market in the coming months.

 

The International Coffee Organization estimated 2.5 million bags of crop losses for 2012/13 global coffee output due to roya or leaf rust disease.

Copyright Reuters, 2013

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