London cocoa futures edged higher on Tuesday after investors took profits from a recent rally and coffee rose on rollover business, while sugar inched up in thin pre-holiday dealings buoyed by a weak dollar. "There is profit-taking in this market (cocoa)," said Romain Lathiere, Switzerland-based fund manager with Diapason Commodities Management.
London cocoa futures soared to a 23-year peak last week driven by supply tightness, and dealers said the market was likely to probe new highs, especially if the pound plumbed new lows, but would remain vulnerable to sell-offs to take profits. Traders also talked of switch activity in cocoa, and noted light origin selling as prices were not too far off last week's (December 23) 23-year peak, basis second month, of 1,820 pounds per tonne.
Cocoa market fundamentals are tight with traders closely watching the slow arrivals of beans to the ports in top producer Ivory Coast, noting that the pace had picked up lately. "If arrivals continue to arrive at a steady pace, this will weigh on the market," a London cocoa trader said. The weak pound also supported London cocoa futures prices, dealers said, noting support in London May at 1,740 pounds and nearby resistance at 1,800.
Sterling continued its downtrend, hitting a 6-1/2-year low against the dollar and approaching parity against the euro as investors braced for the Bank of England to cut interest rates further to support the struggling economy. London May cocoa reversed early gains in the afternoon and finally inched higher to close up 5 pounds or 0.3 percent to 1,760 pounds per tonne in low turnover of 722 lots.
ICE March cocoa was down $5 to $2,546 per tonne at 1747 GMT. Robusta coffee dealings featured rollover business in reasonable turnover but dealers noted an absence of news to drive the market. London March robustas settled up $11 or 0.7 percent to $1,568 per tonne in volume of 19,475 lots, while ICE March arabicas were up 0.5 cent or 0.5 percent to $1.0715 per lb at 1748 GMT.
In sugar, trading volumes were light on two-way investor dealings buoyed by the weak dollar, dealers said. "Dollar weakness is mildly constructive," said Nick Hungate, a soft commodities trader with Rabobank.
Lathiere said, "We did have a good rally of the euro that has given support to softs." ICE March sugar was up 0.14 cent or 1.3 percent to 11.26 cents per lb at 1733 GMT, while London March white sugar settled up $3.50 to $316.00 per tonne in below-average turnover of 718 lots.