Arabica coffee futures rose on Wednesday, lifted by short-covering and signs of improving demand, while raw sugar slipped to a fresh 3-1/2-month low on weak technicals and worries about a looming global supply glut. March arabica coffee was up 1.55 cents, or 1.3 percent, at $1.22 per lb by 1500 GMT, having risen to a session high of $1.2270.
Prices fell to their lowest since December 22 on Tuesday, with dealers pointing to speculative selling pressure this week after exchange data showed funds had not extended their bearish stance in arabica as much as expected. However, a recent rise in open interest, coupled with Wednesday's sell-off, signalled funds have now likely extended their net short position, leaving little room for further selling, they said.
"We're probably now at a point where the spec positioning is likely close to recent records," said one dealer, noting this spurred some short-covering on Wednesday. Fresh demand from roasters and a drawdown in European and US stocks also boosted sentiment, dealers added.
March robusta coffee rose $15 or 0.9 percent to $1,742 a tonne. Dealers said roasters were looking to extend their cover before selling by Vietnamese producers begins slowing nearer to the Tet holiday in mid-February.
March raw sugar fell 0.08 cent, or 0.6 percent, to 13.51 cents per lb, after hitting 13.50 cents, its lowest since September 29. Prices tumbled in the prior session, partly due to reports that Brazil is considering removing a 20 percent tariff on US ethanol imports.
"Last night's close has put a sizeable crack in the support," Sucden Financial's Tom Kujawa said in a note. "We would expect this afternoon further pressure on the downside and potential for fund selling." Concerns about ample global supplies, coupled with good weather in top grower Brazil, also continued to pressure the market.
March white sugar fell $1.80, or 0.5 percent, to$361.60 a tonne. March New York cocoa was up $18, or 0.9 percent, at$1,950 a tonne. March London cocoa was unchanged at 1,391 pounds a tonne. Market focus was on upcoming grind data from North America and Asia, due on Thursday. Dealers anticipate a 1-3 percent rise in North America and at least a 5 percent increase in Asia.