March robusta coffee rose $18 at $1,406 a tonne, supported by a weaker dollar in London on Wednesday. Arabica premium to robustas seen remaining wide due to a shortage of high quality arabicas. March white sugar in London ended off $10.1 at $599.80 a tonne. Traders wait for anticipated demand from Asian importers to materialise.
March cocoa in London finished 21 pounds higher at 2,266 pounds a tonne, having earlier touched 2,269 pounds, the highest level in more than 25 years. Dealers said there was growing concern about a potential cocoa deficit in 2009/10, with production in Ivory Coast expected to start tailing off soon and demand seen rebounding after a recession-linked decline in 2008/09.
Dealers said there was growing concern about a potential cocoa deficit in 2009/10, with production in Ivory Coast expected to start tailing off soon and demand seen rebounding after a recession-linked decline in 2008/09. A weak pound supported prices in early trade although the UK currency later rallied after UK finance minister Alistair Darling announced his pre-budget report.
"Dollar weakness and the oil market are the driving factors," said Jake Weatherall, a soft commodities trader with Rabobank. The euro recovered against the dollar on Wednesday, pulling off its lowest in more than a month that it hit after Greece's credit rating was downgraded in the prior session, as investors decided the move was too far, too fast.
The softs markets were also underpinned by a renewed rally in oil, which rose to around $73 a barrel on Wednesday, rallying after several days of falls on industry data showing a big drop in US crude stocks and on a weaker US dollar. Raw sugar futures were still stuck in their recent 21-25 cents a lb range, underpinned by expectations of strong physical import demand from Asia.
Raw sugar prices doubled this year, due to India's shift to become a net importer of the sweetener, and persistent rainy weather in top producer Brazil which has hit yields. Brazil's main center-south cane region is expected to produce 29 million tonnes of sugar in the 2009/10 season (April-March), down slightly from the 29.4 million tonnes forecast in September, the Cane Industry Association (Unica) said Tuesday.
A fresh influx of 700,000 tonnes of EU white sugar will compete for markets with Dubai's Al Khaleej refinery but demand for the sweetener is ravenous, guaranteeing the additional supply will easily be absorbed. Coffee futures also rose on investor buying triggered by the weaker dollar and stronger oil, with arabica premium to robustas seen remaining wide due to a shortage of high quality arabicas.