Raw sugar extended its gains and rose to a 3-1/2 month high on Wednesday, in part due to concerns about nearby supply tightness, while cocoa futures hit a four-week high after climbing above a key technical level. Coffee futures consolidated lower. March raw sugar on ICE gained 0.41 cent, or 1.6 percent, to close at 25.76 cents per lb, the highest close since November 9, after rising above the 200-day moving average on Tuesday.
Dealers said there was talk that one major trade house may take delivery of most, if not all, the raw sugar delivered against the March contract which expires on February 29. "With expectations that a potential receiver is looking to take March (raws) on, the structure is firming and, in the short term, this implies tightness of supply or at least increased off take," Nick Penney of Sucden Financial said in a market update.
The premium for the front month closed at 1.05 cents, up from around 0.90 at the close on Tuesday. "Prices have been recently supported by a slowdown in exports from Brazil in January and downgrades to Mexico's sugarcane harvest following the ongoing drought," Goldman Sachs said in a market note on Wednesday.
London May white sugar futures climbed $6.10, or 1 percent, to end at $649.30 per tonne. Wilmar International Ltd posted a 57 percent jump in quarterly profit, boosted by a huge revaluation gain in its core palm oil business and from its enlarged sugar operations, but investors dumped shares on concerns about declining margins.
ICE cocoa extended Tuesday's gains on ICE after rising above the 100-day moving average of $2,407 per tonne basis the second position, attracting technical buying. May cocoa on ICE rose $14 to settle at $2,438 a tonne, the highest settlement since January 26. The March contract closed at a $19 premium to May, compared with $32 on Tuesday. On Liffe, dealers said a key short-term focus was the expiry of March options on Liffe next week.
March cocoa on Liffe rose 23 pounds to close at 1,571 pounds a tonne while May ended up 22 pounds at 1,578 pounds. Arabica coffee futures on ICE fell in an inside day, giving back Tuesday's gains and tracking losses in many other commodity markets linked to diminished risk appetite. The market felt pressure from profit-taking and origin selling.
May arabica coffee dropped 4.20 cents, or 2 percent, to finish at $2.0185 per lb. The coffee market was also weighed by continued expectations for a large crop in top grower Brazil. Robusta coffee futures on Liffe were also lower with May closing down $23 at $1,950 a tonne. March closed at a $2 discount to May with diminished concern about potential tightness in available deliverable supplies. The front month had soared to a premium of more than $200 to May last week.