London cocoa futures hit a 4-1/2 year high on Monday, extending last week's gains, on fund buying sparked by rallies across other commodities, dealers said. Coffee's surge to 9-1/2 year highs last Friday fizzled out, with prices under pressure as investors consolidated Friday's rally, while sugar futures joined the fund-driven push higher.
May cocoa rose to a high of 1,175 pounds a tonne, the highest level for the second position since May 2003. It later trimmed gains slightly to close at 1,165 pounds, up 13 on the day on modest volume 2,233 lots.
Front-month March hit a contract high of 1,159 pounds on volume of 9,235 lots. Soft commodities had a taste of bullish sentiment present in several other basic resources last week.
Re-allocation of investor money has seen several commodities hit record highs this month, including oil and gold. "It's been fund buying, even new funds that haven't been in the market are looking at it, liquidating positions in other things. Even a small amount coming into commodities will make a big difference," one London-based dealer said.
"On a supply/demand basis the market looks massively over-cooked, but at the moment the fundamentals have got nothing to do with anything," he added. Coffee prices failed to keep pace with Friday's rally as investors sought to consolidate the recent gains.
Benchmark March closed down $5 at $2,024 per tonne, on volume of 9,050 lots. The market earlier touched Friday's 9-1/2 year high at $2,041 a tonne. "The market's down a bit, it's running out of steam - there's been no reason for it to go up except the weak dollar plus tangible goods-buying against inflation, not really for coffee reasons," a dealer said.
Traders also noted the new revised London robusta coffee contract went live on Monday. On supply, Uganda exported 2.7 million 60 kg-bags of coffee in 2007, up 24 percent from 2.17 million bags over 2006, the country's coffee board said.
Sugar futures rose, having lagged behind last Friday's gain on coffee and cocoa, with dealers citing influence from rallies in other commodities including precious metals.
March white sugar closed up $2.30, or 0.70 percent, at $329.80 per tonne on volume of 6,808 lots. White sugar prices rose to a seven-month high last week, but dealers are still wary about the chances for further upside due to a large global supply surplus.
On the demand front, a one-million-tonnes sugar refinery in Syria will commence production next week and market its output regionally, the main shareholder in the project said on Monday. Austria's Biolux plans to commission the biggest biodiesel plant in China late this year, after delays and record vegetable oils prices that forced Beijing to wind down ambitions.