London cocoa futures on ICE fell on Thursday, retreating from a six-week peak touched a day earlier as the British pound firmed and speculative selling emerged, while the Brazilian real boosted arabica coffee prices. March London cocoa was down 35 pounds, or 2.1 percent, at 1,674 pounds a tonne by 1425 GMT, after falling to a session low of 1,656 pounds.
This wiped out the prior session's gains, when a weaker pound and chart-inspired fund buying lifted the market to its highest since Nov. 7. Dealers pointed to a reversal in the pound, as the currency was boosted by stronger than expected retail sales numbers on Thursday. "The currency is moving around like a flag in the wind at the moment," said one European dealer. "With the thin trading conditions, moves in cocoa have certainly been more magnified than is perhaps justified."
However, market participants continued to monitor the weather in West Africa amid emerging worries that excessive dryness during the annual Harmattan could curb output. "If it's a long Harmattan, then that's probably going to have a bit of an implication," the dealer said.
March New York cocoa was down $48, or 2.1 percent, at $2,269 a tonne. March arabica coffee rose 1.25 cent, or 1.2 percent, to $1.0210 cent per lb. Prices hit a three-month low of 99.20 cents earlier this week. Dealers pointed to a rally in the currency of top producer Brazil as a key factor boosting prices on Thursday.
A stronger currency discourages producer selling by reducing local returns on dollar-traded commodities like coffee and sugar. Brazil's farmers are expected to produce 63.7 million 60-kilo bags of coffee in the 2018/2019 season, up over 5 percent on a previous estimate, consultancy Safras & Mercados said. March robusta coffee rose $18, or 1.2 percent, to$1,525 a tonne. Farmers in Vietnam, the world largest robusta producer, have harvested nearly 85 percent of the 2018-19 crop. Traders said the harvest is expected to end mid-January.
March raw sugar fell 0.03 cent, or 0.2 percent, to 12.44 cents per lb, but remained above this week's 2-1/2 month low of 12.26 cents per lb. Brazil's center-south region crushed 12.6 million tonnes of cane in the first half of December, producing 408,300 tonnes of sugar, industry group UNICA said on Thursday. Marex Spectron had forecast the crush at 11 million tonnes, with sugar output at 425,000 tonnes. March white sugar slipped $0.90, or 0.3 percent, to $340.10 a tonne.