Cocoa futures in London broke through the 2,000 pound barrier on the benchmark second month for the first time in nearly 24 years on Friday, boosted by supply concerns in West Africa and a weak pound, dealers said. Coffee was mostly higher while sugar prices rose on the prospect of Indian imports in the near future.
May cocoa in London ended 55 pounds higher at 2,004 pounds a tonne after peaking at 2,005 pounds, the highest level for the benchmark second month since March 1985. Dealers said the market was supported by investment fund buying while there was also industry buying of forward months. Dealers said the sharp rise in prices had prompted heavy short covering during the last few days with prices climbing more than 300 pounds in just over a week after trading as low as 1,689 pounds on January 15.
"The market is squeezing them out. A lot of sell stops are going off," one dealer said. The market has also been boosted by concerns about crop prospects in top producers Ivory Coast and Ghana, with a drop in production in West Africa likely to result in a third consecutive global supply deficit in 2008/09. March cocoa on ICE rose $81 to $2,661 a tonne.
Robusta coffee futures were higher with the market's focus still on a shortage of tenderable coffee which has seen prices for spot January soar this week. January settled up $109 at $2,244 a tonne on Friday with its premium to March climbing to more than $500. The contract is due to expire next Friday and still has an open position of 7,750 lots. Dealers said a lot of coffee had been graded during the last few days, attracted by the large premium, but a significant proportion had been rejected.
On Thursday, there were 799 lots graded of which 386 were deemed non-tenderable. March robustas ended $11 higher at $1,719 a tonne. Arabica futures on ICE were slightly higher with March up 0.30 cent at $1.1975 per lb. Sugar prices advanced, boosted by the prospects of Indian imports. Faced with rising prices before national elections, India may cut or eliminate duty on raw sugar imports and allow overseas buys without an obligation to export refined sweetener, a government official said on Friday.
"Headlines this morning that an import duty decision might be imminent is stoking the market although most are cautious and wary of the adage of buy the rumour - sell the fact," brokers Fortis said in a daily report. March raws on ICE rose 0.41 cent to 12.79 cents while March whites settled $12.20 higher at $357.20 a tonne. Sugar prices have rebounded strongly in the last few weeks with March raws now trading about 20 percent above its early December low of 10.51 cents.