Coffee futures notched up strong gains on Tuesday as speculators returned to the market while sugar closed with mild gains and cocoa slipped in late trade. London-traded robusta closed up almost 5 percent as the market rallied late in a flurry of fresh speculative buying.
The May contract ended up $104 at $2,394 a tonne - within sight of the $2,450 a tonne high, reached last week. "Speculative interest is driving the market again, but the volumes are fairly modest compared with recent sessions when we reached the highs," one trader said.
"Most of the softs are seeing positive numbers right now." Fund and speculative buying have dominated soft commodities in recent weeks, taking gains in the coffee, cocoa and sugar to more than 20 percent since the start of this year.
Dealers said the market looked ripe for a sell-off from a technical standpoint, but could do little to stand in the way of fund interest. "Every time you think you ought to sell, the market goes the other way," one trader said. The Reuters/Jefferies CRB Index hit record highs for a third straight session as commodities from oil to metals and grains chalked up hefty gains on Tuesday.
The CRB comprises futures in live cattle, cotton, soybeans, sugar, frozen concentrated orange juice, wheat, cocoa, corn, gold, aluminium, nickel, unleaded gasoline, crude oil, natural gas, heating oil, coffee, silver, copper and lean hogs. Cocoa started strongly but eased in afternoon trading and finally closed slightly lower. Benchmark May hit a high at 1,322 before ending down 3 pounds at 1,295 pounds a tonne.
"The funds are the only guys buying to be fair. There's quite a bit of fresh buying coming in after the long weekend in New York. Despite the weaker close, dealers said they did not expect the market to fall too far. "There are too many fund players in New York that will not let the market go down," one said.
"We've been looking for a sharp correction for a long time but at the moment its not behaving like a cocoa market, its more like a financial market." Sugar futures closed slightly firmer with fund and speculator interest again dominating trading.
May sugar closed up $2.50 at $378.50 per tonne, having earlier hit a 15-month high at $383.50. On the supply front, sugar merchant Czarnikow revised down on Tuesday its forecast for the 2007/08 global sugar surplus to 9.68 million tonnes from 10.5 million tonnes predicted in November.