Cocoa futures rocketed higher on Monday, their biggest surge in more than two years, as a slowdown in port arrivals in top grower Ivory Coast encouraged investors to cover short positions as the market focused on upcoming fourth-quarter grind data. Market sources said dry weather in Ivory Coast provided further support, helping to heighten expectations for a global deficit in 2011/12.
ICE March cocoa futures jumped $142, or 7 percent, to close at $2,170 a tonne. London's May cocoa futures on Liffe rose 84 pounds, or 6.2 percent, to finish at 1,442 pounds a tonne. "I think cocoa is in a massive short-covering rally," said The Price Group's senior analyst Jack Scoville, adding the market was ripe for a surge after falling sharply the past few weeks. Cocoa arrivals at ports in top grower Ivory Coast slowed sharply last week, exporters said, as overly dry and windy weather in recent months started hitting output from the West African nation's farms.
"Sentiment is slightly better. Weekly arrivals are lower and we've got (European fourth quarter) grind figures on Friday which should show a rise of about 5 percent (year-on-year)," one dealer said. Dry and windy weather continued last week in most of Ivory Coast's cocoa growing regions, reinforcing expectations of a weak tail end of the main crop and a soft start to the mid-crop, farmers said.
Dealers said a rise in the European grind of at least five percent would be seen as constructive while an increase of 2 percent or less would be mildly bearish. Robusta coffee futures on Liffe touched a fresh 14-month low before turning higher with the rebound seen as largely a technical correction following a prolonged slide.
March robusta coffee on Liffe rose $43 to end at $1,763 a tonne, having hit a contract low of $1,712, the lowest level for the benchmark second month since October 2010. Dealers said robusta market had been weighed by the prospect of a pick-up in the flow of supplies from top producer Vietnam ahead of next month's Tet New Year festival. Farmers need cash for expenses before Tet and also after the festival, when they will buy fuel for the February-April watering season and fertiliser for trees.
Vietnamese traders last week estimated up to 90 percent of the coffee crop had been harvested with more than half now ready for export. Arabica coffee futures on ICE were higher with March gaining 0.10 cent to conclude at $2.2185 per lb. "I think the (arabica coffee) market will keep going down," fund manager Romain Lathiere of Diapason Commodities Management said, adding there was, however, the possibility it could bounce off support around $2.07.
He noted economic concerns driven partly by the eurozone debt crisis remained a key influence while there was also a lack of supportive news on fundamentals to spark buying. March raw sugar on ICE added 0.05 cent to close at 23.34 cents a lb. The front month contract rose as high as 24.65 cents last week, its highest level since mid-November 2011, before heading back down again.
London March white sugar futures went up $1 to end at $605 a tonne. "We have been consolidating since early December. We managed to break up last week but it was smashed back down by the weakening euro and rumours of a new import policy in Europe," Lathiere of Diapason said.
The European Union may ditch upcoming sugar import tenders due to ample domestic supplies. A meeting of its sugar committee is scheduled for Thursday. Speculators turned net long in raw sugar futures and options on ICE Futures US in the week ended January 3, after being short for six weeks, US Commodity Futures Trading Commission (CFTC) data showed on Friday. ICE Futures US lowered its margin requirements for some sugar contracts effective at the opening of business on Tuesday, the exchange said in a release Friday.