Cocoa futures clawed their way higher on Tuesday, climbing back toward nine-month highs after the previous session's tumble, as funds bought the market, betting prices could rise further due to the risk that El Nino weather could curb production later this year.
Raw sugar futures crept up for the first time in 11 sessions. The market hovered above the key 20-cent support level as crop prospects improved in top producers Brazil and India. Coffee dropped to multi-week lows. Cocoa futures firmed after Monday's outside reversal tumble, indicating weakness in the recent uptrend. Speculators' long position in both markets reflected concerns over an El Nino weather pattern developing later in the year and cutting crop prospects.
"The speculative long position is huge. It's the biggest it's been since civil war in Ivory Coast in March last year," a European commodities analyst said. "There are fears about the weather in West Africa and whether it will have an impact on the next main crop." ICE December cocoa futures settled up $42, or 1.8 percent, at $2,441 per tonne in an inside session that remained below Monday's intraday nine-month high of $2,501.
"If the market's going to go much higher than $2,500, then it's going to really need to feel this weather scenario is more than a scare but is actually becoming a real problem," said Shawn Hackett, of Hackett Financial Advisors in Florida. Australia's weather bureau said there were clear signs El Nino was developing in the eastern Pacific, raising concerns over the potential impact on agriculture at a time of soaring global food prices.
Liffe December cocoa futures climbed 26 pounds, or 1.6 percent, to finish at 1,650 pounds per tonne, after hitting 1,678 pounds on Friday, their highest level since November. Raw sugar futures inched higher, the market's first move into positive territory in 11 sessions, as dealers watched the strengthening domestic price in key producer India, which is expected to curb exports after a weak start to the country's monsoon rains.
"India's domestic sugar prices have risen 25 percent since June on concerns over next season's output, with festival demand for sugar, which is nearing its seasonal peak, providing further support," Macquarie Bank said in a sugar report.
Benchmark October sugar futures on ICE were up 0.01 cent at 20.40 cents a lb by 12:45 p.m. EDT (1645 GMT). Indonesia, Southeast Asia's largest sugar consumer, is to issue import permits for 250,000 tonnes of raw sugar, a trade ministry official said, to help plug a domestic shortage of the sweetener for industrial use. Dealers said lower prices were expected to stimulate demand on the physical market as importers looked to restock.
White sugar October futures on Liffe were up 40 cents at $574.40 a tonne. December arabicas on ICE were down 0.3 cent at $1.6675 a lb after hitting the lowest level since June 28 for the second position at $1.6535. November robusta coffee futures closed down $49, or 2.3 percent, at $2,093 a tonne, the lowest settlement since July 17.