March white sugar ended $11.50 higher at $721.70 a tonne on Monday having earlier touched a record peak for the front month of $726.30. Market supported by nearby supply tightness and a weaker dollar. March robusta coffee settled $32 higher at $1,364 per tonne, supported by a sharp advance in ICE arabicas. The discount of robustas to arabicas, however, continues to widen with the fundamentals less constructive for the Liffe market.
May cocoa on Liffe settled 29 pounds lower at 2,242 pounds a tonne. Market weighed by sentiment that the supply concerns which drove prices to a 32 year high last month may have been overstated. Dealers said the sugar market was supported by nearby supply tightness, with front months trading at significant premiums on both ICE and Liffe with production in top producer and exporter Brazil at seasonally low levels.
"I think right now we are in a very tight period between January and March where there is very little in terms of production in the market," said Standard Chartered soft commodity analyst Abah Ofon. Dealers said a rise in crude oil to the highest levels in more than two months and a weaker dollar also contributed to the advance in sugar prices.
"Crude oil prices are rising and that has an effect on all the commodities that are feedstocks for biofuels, sugar being one of them," Ofon said. Standard Chartered's Ofon said sugar prices may rise further in the short-term but should eventually fall as the tightness begins to ease later in the first quarter and during the second quarter of this year.
"If you look three, six months ahead, the tightness in the market is going to ease a little bit...The higher sugar goes up, the harder it is going to fall when it does come down," he said. Cocoa futures were lower with the concerns about supply tightness, which helped drive prices on ICE to a 30-year high last month, seen as possibly overdone.
Cocoa arrivals at ports in Ivory Coast reached 565,122 tonnes in the season to December 27, up from 515,678 tonnes in the same period a year ago, according to data from the Coffee and Cocoa Bourse obtained by Reuters on Monday.
"The much higher than expected cocoa shipments at ports on the Ivory Coast have not had any negative implications for prices so far, as it is assumed that crop yields in the world's largest producing country will soon fall," Commerzbank said in a market note on Monday. "Should this not prove the case, a price correction is likely. We expect prices to drop by between 10 and 15 percent in the course of the year, as the supply situation eases."