London white sugar and cocoa futures hit fresh 4-1/2-month highs on speculative and fund buying on Wednesday, while robustas sold off late in sympathy with New York, erasing earlier gains to six-week highs. Dealers talked of fresh infusions of speculative money into sugar and cocoa in recent days, possibly in a switch away from high-flying energy and metals.
White sugar futures touched new 4-1/2-month peaks on speculative and fund buying in sympathy with ICE raw sugar futures, dealers said. March finished up $2.50 at $309.00 per tonne, a 4-1/2-month high, in good volume of 4,091 lots. "We've seen fund and spec buying with New York leading the way," a trader said. The fundamentals of the sugar market remain weak, however, due to a massive global supply glut, driven by leading producers India and Brazil.
Steady producer selling has capped the upside in futures. The relative weakness of sugar prices, compared to other agricultural commodities which have soared, has triggered increased fund allocations into the sweetener, dealers said.
Ethanol demand in Brazil could climb by 20 percent next year compared with 2007, boosted by the growing flex-fuel cars fleet and attractive prices, an agriculture ministry official said on Tuesday.
London cocoa futures erased early losses to head higher on speculative and fund buying in the afternoon and hit new 4-1/2-month highs, led by US futures. March closed up 8 pounds to 1,087 pounds in reasonable volume of 6,575 lots. May settled up 8 pounds at 1,103 pounds, having earlier touched a 4-1/2-month peak of 1,108 pounds. "We're probably seeing new fund money attracted to cocoa," a trader said.
Dealers referred to consistent hedging pressure from West African producers. Rebels in Ivory Coast fired shots in the air on Tuesday to demand payment of bonuses before the Muslim feast of Eid al-Adha which will be celebrated here on Wednesday, a senior rebel and a Reuters witness said.
London robustas fell sharply just before the close, under momentum from a pickup in selling of arabicas in New York, having reversed direction from a spike earlier to six-week highs. March finished down $20 to $1,884 per tonne in strong volume of 14,900 lots, having earlier hit a six-week peak of $1,917.
The robusta market's focus was partly on January options which expired in the early afternoon without the front month reaching the key $1,900 level. January's session high was $1,885. World coffee production is set to rise to 138.1 million (60-kg) bags in 2007/08 (Oct/Sept), up 12 percent from 123.4 million in 2006/07, investment bank Fortis said in a monthly report on Wednesday.