Arabica coffee futures soared nearly 4 percent to a 10-week high on Tuesday, on heavy short-covering prompted by concerns of dry weather in top grower Brazil, while raw sugar extended the previous session's steep gains. Cocoa futures turned higher after falling to multi-week lows.
The Thomson Reuters-Jefferies CRB index, a bellwether for commodity markets, has risen about 2.5 percent over the past three sessions. Arabica coffee futures soared in heavy volume as concern about forecasts for dry weather in Brazil, after many coffee trees already flowered and require more rain, helped spur heavy short-covering. "The weather forecast going forward for the next week is dry, but it's not like it's dry down there," one New York dealer said.
Coffee trees in Brazil's main growing areas have begun sprouting their first flowers in good quantity, an agronomist at private weather forecaster Somar said, boding well for the prospects of the 2013 off-year harvest. ICE arabica December futures settled up 5.60 cents, or 3.1 percent, at $1.8365 per lb, the strongest settlement for the spot contract since July 23. Earlier the contract jumped 3.7 percent to a session high at $1.8455. November robusta coffee futures rose $21, or 1 percent, to settle at $2,200 a tonne.
"There's a lot of positive technical action and short-covering into significant origin selling," one veteran New York dealer said, adding that many were concerned about upcoming dry weather in Brazil. The benchmark arabica contract extended its gains after finding support at the 100-day moving average at $1.7235 per lb on Monday, triggering automatic buy orders around $1.8370, a recent session high. Heavy origin selling from mild arabica producing countries in Central America, Colombia and Brazil prevented steeper gains and contributed to the steep volume, dealers said.
ICE March raw sugar futures jumped 0.46 cent, or 2.2 percent, to close at 21.59 cents per lb, the highest finish for the spot contract since August 6. The contract surged to a session high at 21.72 cents per lb, buoyed by a firm commodity complex and additional buying after hitting the 100-day moving average at 21.34 cents. December white sugar on Liffe rose $10.50, or 1.8 percent, to close at $592.60 per tonne. Benchmark March cocoa futures rose 19 pounds, or 1.2 percent, to settle at 1,596 pounds per tonne, having dipped to 1,555 pounds earlier in the session. ICE December cocoa closed up $25, or 1 percent, at $2,475 per tonne, after falling to $2,412, the lowest since August 23.