Soft commodity futures marched higher across the board on Tuesday, with cocoa up around 5 percent, helped by a weak dollar and stronger equities although trading volumes ebbed due to the looming year-end holidays, brokers said. Analysts described the move in cocoa as mainly technical short-covering in very modest volume.
Sugar and coffee futures gained as well. New York's March cocoa on ICE soared $115, or 5.5 percent, to finish at $2,185 a tonne. London's March cocoa on Liffe rose 57 pounds or 4.2 percent to close at 1,400 pounds a tonne. "The weaker dollar and positive equities - that's probably what's driving it," Country Hedging Inc senior analyst Sterling Smith said of the strength in the softs complex. Smith said cocoa, which rallied last week from a three-year low, "is seeing a rash of short-covering and bargain-hunting. It's a technical bounce."
"It's a macro relief rally, corrective in nature," one veteran softs dealer in New York said, noting the thin volume. "If it holds today, we could see that the weekly chart's close last week is or was a good entry point back to the upside at $2,101," said Bill Raffety, senior analyst for Penson Futures in New York.
Ivory Coast's cocoa output is running about 13 percent higher than in the last season, but the performance is unlikely to last beyond mid-January, exporters estimated on Monday. Cocoa purchases declared to Ghana's Cocobod reached 448,528 tonnes by December 8 since the start of the season on October 14, data from the industry regulator showed on Tuesday.
Sugar and coffee futures rose. The sweetener continued to derive support from lower Brazilian production although gains were seen capped by big crops in the European Union, Russia, Ukraine, India and Thailand. Thomas Kujawa of Sucden Financial said in a market note that sugar may be more of a scale sell at present, citing abundant northern hemisphere crops coming on line and the general economic malaise.
ICE Futures US said on Monday it was extending trading hours in the raw sugar market, its most heavily traded agricultural market, by two hours to improve access to the market for vital Asian participants. Coffee gained and Smith said he believed the ability of bean futures to hold support should encourage the market to run back up to the $2.30 a lb level. New York's March arabica coffee futures gained 3.35 cents, or 1.5 percent, to close at $2.228 a lb. London's March robusta was up $9 to end $1,887 a tonne.