Arabica and robusta coffee futures surged on fund buying on Tuesday, while sugar rose in sympathy with oil and cocoa edged down on hedge selling, dealers said. Arabica coffee futures trading on ICE jumped 6.8 percent to a five-week high on heavy fund buying, and then retraced.
Benchmark robusta coffee futures jumped 7 percent to a three-week high of $1,680 per tonne on investment fund buying, tracking arabicas. "It's fund buying mainly," one London robusta coffee futures dealer said. London March robustas finished at $1,673 per tonne, up $103 or 6.9 percent.
The key ICE March arabica coffee contract soared 8.45 cents to $1.1615 per lb, a high dating back to November 28. March arabicas trimmed gains to stand at $1.1575 per lb, up 8.05 cents, or 7.5 percent, at 1747 GMT. Sugar futures rose on trade and investor buying against producer selling, tracking oil on tensions in the Middle East.
Sugar dealers noted a correlation between sugar futures and oil, adding that external market forces rather than fundamental factors appeared to be driving the market. London March white sugar closed up $7.6 or 2.4 percent to $335.40 per tonne in modest volume of 2,422 lots. ICE March raw sugar futures were up 0.45 cent or 3.8 percent to 12.27 cents per lb at 1749 GMT.
"As long as the crude oil values hold these levels, then a test of the 12.50 level in the spot March must be expected," David Sadler, a senior sugar futures trader with Sucden, said in a market report. Some sugar dealers said they believed fund re-allocations out of sugar had partially been done, but more selling of sugar positions was likely later this month in the re-weighting.
Cocoa futures edged down on hedge selling and rollover business, and one trader noted fund buying to boost allocations in the new year, adding market fundamentals appeared constructive. Traders were looking forward to seeing new cocoa bean arrivals data at ports of main West African producers. Arrivals have been slow of late signalling a tight global supply outlook.
Many traders believe that 2008/09 will be another global deficit year for cocoa. London May cocoa settled down 17 pounds or 0.9 percent to 1,769 pounds per tonne in light turnover of 2,133 lots. ICE cocoa futures seesawed on pressure from the pound against the dollar, underscored by strength in other commodities and fund buying, dealers said. ICE March cocoa was up $55 to $2,610 per tonne at 1740 GMT.