Arabica coffee futures on ICE dipped on Friday, closing at a 33-month low as certified stocks rose to a three-year high and dealers focused on the market's narrowing arbitrage with Liffe robusta, while raw sugar turned higher. ICE cocoa inched lower in volatile, technically driven dealings, weighed by expectations of ample West African mid crops while the May/July spread continued to widen on new grading penalties effective for the July delivery.
ICE May arabica coffee edged down 2.15 cents, or 1.5 percent, to settle at $1.3750 per lb, the second-position's weakest finish since June 2010. The session low reached $1.3715. The market has been in a bearish trend for months, weighed down by expectations of a big "off-year" Brazilian crop and ample Colombian output, while growers continue to deliver to the board, with ICE certified stocks climbing to nearly 2.74 million 60-kg bags on March 14, the highest level in three years, exchange data showed.
"We continue to see warehouse stocks climb and until we see that trend reverse, if we don't see that happening, we're going to look at a market that's going to be facing some pretty good pressures," said Sterling Smith, futures specialist at Citibank in Chicago. Dealers were also active dealing the arbitrage between Liffe robusta, which recently rallied to a five month high, and ICE arabica. The spread between the two markets has narrowed to the lowest level in four years, having fallen just below 40 cents per lb in intraday dealings.
"It's a risky play in my view because the short position by the noncommercials is very large and when they reverse positions, it will be quick." May robusta coffee futures on Liffe closed up $29, or 1.3 percent, at $2,192 a tonne, consolidating from the previous session's fall from the highest level for the benchmark second month since October 2012 at $2,216 on Wednesday.
Dry weather in top grower Vietnam, combined with a retention of supplies by farmers hoping for rising prices, underpinned the robusta market, but reports of rains could dampen prices, analysts said. "Growers say damage is being done as rains stay away," Wippler said. "When the rains come, it remains to be seen how far they can mitigate damage done to the crop so far."
May raw sugar futures were initially weak but turned firm, settling up 0.05 cent, or 0.3 percent, at 18.89 cents a lb. Sugar prices were supported by tight inter-crop supplies, anticipated ethanol tax cuts and risks of logistical delays to sugar exports in the top producer Brazil, dealers said.
May white sugar on Liffe finished up $2.20, or 0.4 percent, at $539.40 a tonne, paring earlier gains that reached $544.00, the highest level for the spot contract since November 6, 2012. May cocoa on ICE finished down $15, or 0.7 percent, at $2,115 a tonne, after recovering from a nine-month low of $2,034 touched on March 7. Dealers said an expected late start to West Africa's April-to-September mid crops had supported the rebound in prices, though it was now consolidating.
The May/July spread continued to widen as dealers who were long the spread were seen liquidating ahead of new cocoa bean count penalties that will go into effect at the July delivery, dealers said. May cocoa on Liffe settled down 14 pounds, or 1 percent, at 1,427 pounds per tonne.