Cocoa futures on Liffe turned firm on Thursday after hitting their 200-day moving average and pushing the spot contract's premium to the highest level in more than two years. Arabica coffee futures climbed from a two-and-a-half-year low on light short-covering, while sugar eased but remained well within its recent range amid a lack of new fundamentals.
Cocoa futures trading on Liffe climbed on support from the weak pound against the US dollar. Dealers also said the high failure rate of cocoa being graded on the exchange, where certified stocks are at historically low levels, was supporting prices. "Most of what has failed recently has been fresh cocoa, and obviously if it had passed certified stocks would be higher," said a London-based dealer.
Liffe March cocoa futures gained 7 pounds, or 0.5 percent, to settle at 1,547 pounds a tonne after briefly falling below the contract's 200-day moving average at 1,537 pounds. The premium on December cocoa over March widened to 70 pounds from 48 pounds at Wednesday's close, ahead of December's expiry next week. This is the spot contract's biggest premium to the second position on a continuation chart since August 2010.
Cocoa futures on ICE were weak for most of the session on pressure from the weak sterling, but pared their losses during the settlement window, with March closing flat at $2,420 a tonne. Analysts at Commerzbank see prices remaining steady, writing in a research note published on Thursday that most supporting news had already been factored in by the market.
March arabica coffee futures were up 1.35 cents, or 0.9 percent, at $1.5045 per lb by 12:34 pm EST (1734 GMT), consolidating above the two-and-a-half-year low of $1.4635 touched in the previous session. "We've seen prices start to consolidate at lower levels and we think that in the very short term there isn't any real compelling fundamentals to support prices. So, if anything, we expect this recent sideways trend to continue," Sudakshina Unnikrishnan, an analyst at Barclays, told Reuters.
The market is expected to stay at current levels until more information on the progress of the next Brazilian crop, one of the producer's two-yearly lower harvests, becomes available. "Going through to the end of this year and early next year, we don't really expect any meaningful moves in prices. The next move will be looking into the next Brazilian crop, where crop prospects are not looking that good," Unnikrishnan said.
March robusta coffee futures were up $27, or 1.4 percent, at $1,913 a tonne. March raw sugar futures on ICE were down 0.12 cent, or 0.6 percent, to 19.45 cents a lb, remaining stuck in the middle of their recent range of 19 to 20 cents. March white sugar on Liffe eased $1.90, or 0.4 percent, to $518.60 per tonne.