Sugar prices rose on Thursday as the market started to regain ground lost during index fund reweighting, boosted partly by signs of a pick-up in demand in the physical market, dealers said. The sugar market advanced despite weaker crude oil prices, declining equity markets and a firmer dollar, all potentially bearish influences.
"A lot of people sold in anticipating that fund reweighting would put more pressure on the market than it has done," Nick Hungate, soft commodities trader with Rabobank, said, adding some of those shorts were not looking to cover. "Markets are getting their own personalities back. We are starting to trade individual market fundamentals," he said.
March raw sugar on ICE rose 0.39 cent to 11.82 cents a lb by 1620 GMT. Prices fell back from a peak early last week of 12.46 cents on index fund selling but scale-down trade buying has emerged to stem the decline. Dealers said the drop in prices had stirred increased demand in the physical market. March whites in London rose $9.80 to $334.40 a tonne.
Cocoa futures eased, extending Wednesday's losses, with prices on ICE dipping to a one-month low. "Two big trade houses are locking horns (on cocoa). Today the sell-side has come in first," one cocoa dealer said. March cocoa on ICE was off $29 at $2,369 a tonne after earlier dipping to $2,351 a tonne, its lowest level since mid-December. Dealers said the market was awaiting fourth-quarter US grindings data following the release of stronger-than-expected European figures earlier this week.
They added, however, the report may be overshadowed by outside market influences and the trade house tussle. May cocoa in London was down 11 pounds at 1,710 pounds a tonne. The contract peaked at 1,812 pounds on Wednesday, within striking distance of a 23-year peak for the second month of 1,820 pounds set last month. Slow port arrivals in West Africa continued to underpin the cocoa market.
Cocoa arrivals at ports in top grower Ivory Coast reached 451,212 tonnes by December 21, down from 721,413 tonnes in the same period a year ago, according to data from exporters obtained by Reuters on Thursday. Coffee futures were little changed in thin conditions. March arabica futures on ICE edged up 0.20 cent to $1.1485 per lb while March robustas in London stood $3 lower at $1,635 a tonne.
Dealers said both markets look set to be rangebound in the short-term with Vietnamese hedge selling interest helping to keep a lid on prices in London. Uganda's coffee board said on Thursday coffee exports rose 23 percent to 3.3 million 60-kg bags in 2008, while earnings rose 49 percent to $398 million.