London cocoa futures ended lower on Wednesday as producer and speculative selling emerged after prices had earlier risen to the highest level in almost three weeks, dealers said. Robusta coffee ended mostly firm with the exception of the spot month which rose on concern about a supply squeeze while white sugar finished little changed.
Cocoa futures ended the day slightly lower with March 7 pounds lower at 960 pounds a tonne. The benchmark contract had earlier risen to a peak of 981 pounds, its highest price since November 2. "The market rose on a bit of early fund buying but we then saw origin and spec selling," one dealer said. "Every-time we see the market lifting, it is going to instigate some producer selling," the dealer added.
Dealers said producers in West Africa would be looking to take advantage of any advance in prices with newly harvested main crop supplies starting to build in ports at top producer Ivory Coast.
Business featured rolling forward of positions outs of December into March with the front month due to expire in 3 weeks. Robusta coffee futures finished mostly steady although the spot month's premium widened back to $500, a level it held at for much of last week, up from around $460 at the close on Tuesday.
The benchmark January position ended $2 higher at $1,826 a tonne while November finished up $37 at $2,321 a tonne. Dealers said robusta prices were underpinned by the prospect of further rain delays to harvesting in top producer Vietnam. Vietnam has asked nearby countries to give shelter to thousands of its fishermen from a tropical storm now nearing the Spratly archipelago in the South China Sea, the government said on Wednesday.
Spot November was expected to remain volatile until its expiry at the end of next week as concern persisted about whether sufficient supplies were available to meet the large open position on the contract. London white sugar futures closed little changed on brisk two-day speculative trade, dealers said.
March whites ended a marginal $0.80 higher at $287.50 a tonne. Dealers referred to active "straddle selling" - selling a put and a call at the same strike price with the same expiry. Traders who believe prices will trade in a tight range use the strategy.
"We are stuck in a very low volatility environment," one dealer said. Dealers noted a lack of producer selling, as the market remained mired at the lower end of its recent range. Upside potential was capped by a huge global supply glut driven by Brazil and India. Sugar prices, already depressed by the glut, have further room to fall in the coming months due to the weight of exports from India as the country becomes the world's top supplier of the sweetener.
The market took note of an upward revision in the USDA's forecast for world sugar production. The US Department of Agriculture on Tuesday revised its forecast for world sugar production in the 2007/08 marketing year, raising it 2.8 million tonnes (raw value) from a previous forecast to 167.1 million tonnes.
Sugar prices were underpinned by strong oil prices, because of a possible link between the price of crude oil and demand for alternative green energy, such as cane-derived biofuel.