New York cocoa futures on ICE rallied in heavy volume on Thursday, buoyed by the strong British pound and technically inspired fund buying, while the London market inched higher, with both nearing recent 4-1/2-year peaks. Arabica coffee also surged, recovering from a week's worth of losses, while raw sugar rallied in light volume, with the markets buoyed by the rising currency against the US dollar in Brazil, the world's top producer of both commodities.
March New York cocoa settled up $53, or 1.6 percent, at $3,386 per tonne, not far from the November 20 high of $3,420. The move caused heavy activity on the March/May spread, lifting its premium as high as $10, a one-month high and up sharply from $7 on Wednesday. New York prices were supported by the 1.2 percent rally in the pound against the US dollar, while this prevented stronger gains in London, traders said.
"This also helps the technical outlook which attracted spec buying," one dealer said. March London cocoa settled up 13 pounds, or 0.6 percent, at 2,309 pounds per tonne, near last month's 4-1/2-year peak at 2,317 pounds. The December/March spread widened to a discount as big as 32 pounds, a contract low, with traders saying that this indicates abundant nearby supplies amid weak demand.
"(Funds) just don't see a reason to sell it. It has been a steady climb (in prices) and I think it is going to continue," one dealer said. The market has been boosted by a slowdown in weekly port arrivals in top grower Ivory Coast. ICE March arabica coffee settled up 4.4 cent, or 3.7 percent, at $1.2485 per lb, touching resistance at the 100-day moving average.
Brazil's currency strengthened on Thursday after the opening of congressional impeachment proceedings against President Dilma Rousseff the night before. A stronger real depresses prices in local currency terms in Brazil, making producer sales of coffee and sugar less attractive.
January robusta coffee settled up $38, or 2.5 percent, at $1,537 per tonne. Raw sugar futures also rose with March settled up 0.24 cent, or 1.6 percent, at 15.58 cents per lb. ICE March white sugar futures settled up $4.70, or 1.1 percent, at $417 per tonne.