Raw sugar futures on ICE extended their rally to a 1-1/2-month high on Wednesday on sustained concerns of a cane shortage in India, the world's second-largest producer, while coffee jumped on currency strength in major producers Brazil and Vietnam. Cocoa prices also joined in the broad-based rally. Spot raw sugar futures settled up 0.38 cent, or 1.9 percent, at 20.89 cents per lb, just below the session high of 20.94 cents, the highest since November 16.
This was the contract's sixth straight rising session, with prices jumping more than 5 percent on Tuesday, when a producers' body said over two dozen mills in Maharashtra, India's top-producing sugar state, stopped crushing due to cane shortages. "It's quite a fundamental issue ... It was expected but the (India) report reinforced these expectations," said Rabobank analyst Carlos Mera. One dealer said that the funds appeared keen to re-establish long positions, potentially lifting prices to a range of 21.5 to 22 cents.
The 14-day relative strength index was nearing overbought levels, however, around 68. "After such a dramatic move higher, it would not be a surprise to see some form of correction or consolidation, especially with some technical indicators approaching 'overbought' status in both New York and London," said Agrilion Commodity Advisers in a note. White sugar futures settled up $7.30, or 1.3 percent, at $550.20 per tonne, after hitting the highest since November 16 at $551.40.
In coffee, spot arabica futures settled up 4.4 cents, or 3.20 percent, at $1.418 per lb, its highest since December 22. March robusta settled up $41, or 1.9 percent, at $2,165 per tonne, the highest since November 17. Both markets garnered support from strong currency movements in their top growing countries, deterring producer selling on international dollar-denominated markets. March New York cocoa settled up $71, or 3.3 percent, at $2,237 per tonne.
One US trader said prices were lifted by short-covering as prices corrected above the lowest level in more than 3-1/2 years that was reached on Tuesday. The jump came after cocoa prices finished 2016 with their biggest loss in 17 years on expectations of a global surplus. "At these prices, we believe we are near the bottom of the market, as these levels will incentivise consumption," Rabobank's Mera said. March London cocoa settled up 49 pounds, or 2.8 percent, at 1,806 pounds per tonne.