Liffe December white sugar rises $11 to end at $644.10 per tonne on Monday after setting a contract high of $648.30. Dry weather in Brazil, floods in India, low global stocks and strong demand propel prices higher. Liffe December cocoa ended 17 pounds higher at 1,900 pounds a tonne. Market consolidating after recent slide but limited scope for significant rebound given generally favourable outlook for West African main crop.
Liffe November robusta coffee ended $9 higher at $1,736 per tonne, supported by tight supplies before the start of the new crop in October/November. Downward revisions to 2011/12 Brazilian sugar output forecasts after a prolonged dry spell, and concerns over floods in India, helped push sugar futures higher, dealers said.
"There are ongoing concerns about the impact of adverse weather on crops," said James Kirkup, director and head of sugar brokerage at ABN Amro Markets (UK) Ltd in London. "All commodity markets are benefiting, especially those with a good fundamental story to tell - like sugar or cotton," Kirkup said.
Dealers talked of tightening global sugar supplies into the first half of 2011. "The trade all seem to be looking at the March 2011 ICE structure as a potential bottleneck for buyers and despite the March trading at a 200-points premium over May, we urge caution to the bears," said Thomas Kujawa of Sucden Financial Sugar. "It seems we will continue sideways to higher." However, dealers said the market was vulnerable to a correction lower as no shortage of global coffee supplies is expected in 2010/11. "If you look at global supply and demand I don't think the market should be trading this high," a London-based broker said.
After widening to historically high levels, the premium on the arabica market over the robusta market has eased, as robusta gains outpaced those on the arabica market in recent sessions. "It's a correction that's been due, the strong premium has been a key feature of the market for some time," a London-based broker said.
Cocoa futures on ICE joined the broad-based advance in agricultural commodity markets as the market awaited a clearer picture of the outlook for the West African main crop season, due to start on October 1. Dealers said the bull story of decreasing yields from ageing trees in Africa has been overtaken by good weather and good pod counts in recent months setting a bearish tone for prices.