Cocoa extended its rally in heavy volume on Tuesday, after the prior session's surge from a three-year low marked an outside reversal, while arabica coffee consolidated up from a one-year low. Sugar finished up a shade in choppy dealings. ICE cocoa's rise was "a continuation of yesterday. I think people are shocked that the open interest did not go down as much as they thought it would in March," said Nick Gentile, head of trading operations at Atlantic Capital Advisors in New Jersey.
Open interest in the ICE benchmark March contract fell 325 lots to 83,890 lots on Dec. 12, showing there was less profit taking by shorts than had been expected, he said. March ICE cocoa closed up $62, or 2.8 percent, to settle at $2,243 per tonne, after climbing nearly 4 percent to a session high of $2,265 in strong volume approaching 20,000 lots by 1:57 p.m. EST (1857 GMT).
On Monday the contract rallied sharply after sliding early in the session to a three-year low for the second month contract of $1,983. March cocoa on Liffe rose 54 pounds, or 3.8 percent, to end at 1,473 pounds a tonne in heavy volume of more than 22,000 lots. Dealers said the bounce was sparked partly by a forecast from major cocoa trader Olam International Ltd of a tightening global market in 2012, with supplies moving into deficit after this year's record surplus drove prices too low. "Cocoa had an unbelievable technical reversal," Gentile said, adding that the ICE contract could be on track to reach the 50 percent Fibonacci retracement level at $2,372 per tonne.
The Jakarta Futures Exchange (JFX) will launch a cocoa bean futures contract on Thursday, an official at the organisation said. Arabica coffee futures saw a little jump in consolidative dealings lifted by the firm commodity complex, after closing at a one-year low Monday. March arabica coffee on ICE settled up 1.90 cents, or 0.8 percent, at $2.2295 a lb. Robusta coffee futures also firmed, but to a lesser degree, with upside limited by a big harvest in top producer Vietnam. March robusta coffee on Liffe closed up $16, or 0.8 percent, at $1,939 a tonne in thin volume of less than 4,000 lots.
The International Coffee Organisation (ICO) revised up its 2011/12 global coffee output forecast to 128.6 million 60-kg bags from a previous forecast of 127.4 million. Vietnam's coffee exports more than doubled in November from the previous month, taking shipments so far this year to 1.1 million tonnes, up 4.4 percent from the year-ago period, keeping prices under pressure. ICE raw sugar futures edged up in their fourth straight inside day, but potential gains were capped by expectations for big crops from the EU, Russia, Ukraine, India and Thailand, and a lack of physical offtake, brokers said.
Benchmark March futures finished up 0.15 cent, or 0.6 percent, at 23.44 cents a lb. The market took note of news that sugar output from Brazil's center-south cane crop from the start of the season through Dec. 1 hit 30.99 million tonnes, down from 33.03 million tonnes this time a year ago, industry association Unica said.