Soft commodities put in a strong performance on Wednesday, with London cocoa futures hitting a five-year high on fund and speculative buying, while sugar rallied ahead of the spot month expiry on Thursday. Speculative buying also drive robusta coffee futures up, but momentum failed to take prices above Monday's 10-1/2-year peak.
London May cocoa pierced psychological resistance at 1,300 pounds to touch a five-year high of 1,309, driven higher by speculative pressure, before trimming gains to end at 1,294 pounds, up 11, on volume of 4,011 lots.
Despite technical charts showing overbought signals, cocoa prices have risen steadily from around 1,200 pounds less than a month ago. "People are just too scared to sell this market. Those that have sold, have had their fingers burned," one dealer said.
"Every day we see the same thing. Spec and fund buyers are bidding the market up. The trade is just not involved," he said. Dealers said there was little origin selling in the market, although there was talk of some offers from Ghana. Lonent losses as funds got the bit between their teeth, despite plenty of physical availability.
"Short-term there seems to be plenty of availability but the funds are still taking us to the upside, if you look at the near-term spreads they don't reflect any bullishness," one dealer said. Much activity was also focused on expiry of the spot month March contract on Thursday. March closed up $12.50 at 344.50 on volume of 5,681 lots.
Dealers said they expected a modest delivery tonnage against the expiry, most probably Brazilian and perhaps including Thai origin, and that there was likely to be a lack of receivers. Physical sugar demand was subdued this week as futures prices remained too high for many buyers and European traders focused on the likely start-up soon of a new refinery in Egypt.
Sugar is being offered at a discount in the cash market, but dealings remain slow and only modest inquiries have been seen so far, brokers said Wednesday. Coffee futures settled higher on speculative buying, reversing earlier profit-related losses. May closed up $45 at $2,272 per tonne on volume of 12,039 lots, dominated by switches between March and May. Prices hit a 10-1/2-year high on Monday at $2,291.