Arabica coffee futures surged to a two-month high on Monday, extending their biggest rally in a year as increasing concerns about dry crop weather forecasts in top grower Brazil sparked a fresh wave of short covering. Raw sugar futures tumbled more than 2 percent after falling through their 200-day moving average, but hovered near the prior session's eight-month high. Cocoa futures turned higher in a late-day buying spree after falling to their lowest levels since late August.
US meteorologists are forecasting limited rainfall through October 22 in several of Brazil's coffee-growing regions, cautioning that this raises concern for production potential and stress flowering, though there is still time for conditions to improve. "The dry weather is a just a reminder there can potentially be these shock moves higher and it makes the short look even more vulnerable," a London dealer said.
The concern was that dry weather in Brazil could hamper crop flowering. Commodity Weather Group said in a report that the chance of rain in its 11- to 15-day forecast is leaning toward drier conditions, keeping flowering concerns in place for at least the northern two-thirds of the coffee belt.
December arabica coffee settled up 2.9 cent, or 2.2 percent, at $1.345 per lb, after climbing to $1.376. Despite the dry weather concerns, prices are still well below those of a year ago when they rallied above $2.20 per lb. Total open interest fell for the sixth straight session on October 9 to a one-month low, as the spot contract extended its biggest rally in a year, a rise of 20 percent in 2-1/2 weeks.
November robusta coffee ended unchanged at $1,623 per tonne. Raw sugar futures sank after sell-stops were triggered. March raw sugar settled down 0.1 cent, a 0.7 percent, at 14.24 cents per lb, after falling 2.6 percent to 13.96 cents. Speculators increased net long positions in raw sugar by more than five times in the week ended October 6. December white sugar settled up $1, or 0.3 percent, at $393 per tonne.
In cocoa, dealers said Europe's third-quarter cocoa grind was expected to be little changed from a year ago in data set for release on Wednesday, while data on Thursday should show it down in North America by 2 percent to 10 percent. New York December cocoa settled up $25, or 0.8 percent, at $3,074 per tonne, while London December cocoa closed up 7 pounds, or 0.3 percent, at 2,091 pounds a tonne.