Robusta coffee futures ended higher on Thursday, boosted by speculative and fund buying as the market rebounded from recent weakness, dealers said. Cocoa also finished higher with the market threatening to finally break out of its recent narrow range while white sugar ended weaker on options-related selling.
"The funds are trying to protect their positions," a coffee dealer said, adding they were holding a large net long position and looking to reverse the market's recent fall.
January ended $16 higher at $1,825 a tonne. The contract has fallen sharply this month from a peak of $1,997 on November 7 to a low of $1,773 on Tuesday. Dealers said the main talking point remained the fate of the November contract, which expires on Friday.
The front month has been holding at a premium of $500 to January for the last few days, underpinned by concern there is not enough coffee available to deliver against the contract's large open position. Dealers said Liffe may have imposed restrictions on the long position holder which limited the premium to $500 as well as exerting pressure on shorts to either cover or deliver.
Some said delivery defaults were possible. "We do not comment on specific contracts...but our role as an recognised investment exchange is to ensure that an orderly market is maintained at all times," a Liffe spokeswoman told Reuters on Thursday.
There has been talk the squeeze on November may spill over to January and the second month moved to a small premium over March on Thursday from a marginal discount a day earlier. Cocoa futures also ended firmer, with the market climbing to its highest level in more than a week.
"There was definitely some spec buying around and there was a bit of trade interest as well as the market lifted. It is a bit more lively which makes a nice change," one dealer said. March ended 11 pounds higher at 970 pounds a tonne after peaking at 975 pounds.
The market has been locked for several days between underlying industry buying and overhead producer selling. Rebels holding the northern half of Ivory Coast since a 2002-2003 civil war and government troops will start to disarm from December 22 before forming a new national army, a peace mediator said on Thursday.
White sugar futures finished lower, reversing the prior day's gains, with dealers citing options-related selling. March whites ended down $3.30 at $287.70 a tonne. The contract has held between $280.10 and $292.60 this month with a large global supply glut keeping a lid on the market. Dealers noted a lack of physical offtake and said that if prices recover, producer selling will emerge quickly.
Kenya's sugar output rose by 3.5 percent in the first nine months of 2007 to 385,709 tonnes, compared with 372,794 tonnes in the same period previously, statistics by the industry regulator showed on Thursday.