White sugar futures on ICE rallied on Tuesday on fears over tight supplies before a contract expiry later this month, while robusta coffee steadied near a one-year high, underpinned by strong physical demand. London cocoa was supported by a weaker pound, which hit a fresh 31-year low against the dollar, in the fallout of Britain's vote to leave the EU.
White sugar futures jumped on concerns over tight supplies before the August expiry on July 15. "The trade shorts are on the run as they finally wake up to the fact there won't be any significant deliverable supplies against the August expiry," a senior trade source said. "Watch the August fly!"
August white sugar was up $11.40, or 2 percent, at $576.30 per tonne at 1303 GMT, after surging to a contract high at $581.20. October raw sugar futures were up 0.1 cent, or 0.5 percent, at 20.88 cents a lb. On Thursday the most-active contract hit a more than 3-1/2-year high of 21.22 cents a lb, buoyed by a shift of the global market into deficit after years of surpluses.
"With the July expiry out of the way and dry weather in Brazil, one would expect some consolidation before making another leg higher," said Nick Penney, a senior trader with Sucden Financial Sugar. "Any dent in production caused by weather in a deficit environment will have a magnifying effect and explains why the fund community is so comfortable being long."
Robusta coffee futures held steady near a one-year high, supported by strong physical demand. Dealers said there was a wide arbitrage between arabica and robusta futures prices, boosting the appeal of robusta buying. They noted a premium of 65-66 cents a lb of September arabica futures over September robusta, compared with a premium of 48 cents a lb in mid-June. "That creates tremendous encouragement to buy robustas," a senior coffee trader said.
Arabica futures were supported by concerns over the quality of beans in Brazil's current harvest after heavy rainfall. ICE September arabica futures were up 0.15 cent, or 0.4 percent, to $1.4655 per lb. September robusta coffee was up $1, or 0.1 percent, at $1,769 per tonne, having touched a one-year high of $1,773 on Monday. London September cocoa was up 41 pounds, or 1.7 percent, at 2,427 pounds per tonne, a contract high. September New York cocoa was up $38, or 1.3 percent, at $3,033 per tonne.