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Cocoa marks big annual gain as coffee, sugar prices slide

Cocoa futures in New York and London were mixed on Tuesday, with both markets finishing 2013 up more than 20 percent in their biggest annual gains in four years, bucking a broader commodities downtrend. ICE arabica coffee futures plunged as speculators renewed their selling and commercial buying remained quiet, skidding to a 2013 loss of 23 percent.

Raw sugar futures gained in subdued trading, even as 2013 marked a third straight annual loss and expectations prevailed for a global supply glut to continue into 2014. Commodities were largely down in 2013 as investors piled into financial markets, and the benchmark Thomson Reuters/Core Commodity CRB index recorded a third down year. US cocoa futures escaped the selloff and finished up 21 percent for the year as speculators held a near-record net long position amid expectations for a global deficit.

ICE March cocoa closed at $2,709 a tonne on Tuesday, down 0.1 percent from the previous day on profit-taking. The commodity's strong gains place its performance on the CRB index, made up of 19 markets, third only to natural gas and orange juice futures. Both New York and London markets saw their biggest annual gains since 2009. "It's supply and demand that wins in the end (and) the bottom line is that there's not enough cocoa," said Michael Smith of T&K Futures & Options, a Port Saint Lucie, Florida-based brokerage.

Second-month Liffe May cocoa settled up 14 pounds at 1,727 pounds a tonne, ending the year up more than 20 percent. Laurent Pipitone, director of the economics and statistics division at the International Cocoa Organisation (ICCO), said the association expects a second consecutive global deficit this season as demand returns in developed markets.

COFFEE SKIDS TO 23PC YEARLY LOSS March arabica futures on ICE settled at $1.1070 per lb, tumbling 4 cents, or 3.5 percent, from the previous day's close, its biggest daily loss since August. Coffee's final one-day rout of 2013 came as speculator selling picked up on chart signals and weak commercial buying amplified losses.

The benchmark spot contract ended the year down 23 percent, marking a three-year losing streak and making coffee the fourth-worst performer among the 19 components in the CRB index. A global abundance of supplies due to bumper crops in top coffee grower Brazil and in Colombia, the biggest producer of washed arabica, fed the long-term bearish sentiment that caused speculators to hold their bearish stance throughout 2013. The leaf disease roya threatened crops in Central America, but damage has been less than expected.

"There's too much coffee ... it's going to be another tough year," said Jack Scoville, a vice president for Price Futures Group in Chicago. "We could certainly see $1 coffee." That level is a key area of psychological support, expected to be tested again in 2014. Spot prices have recovered from a more than 7-year low of $1.0095 per lb in November.

Liffe March robusta coffee settled down $11 to $1,683 a tonne, ending the year down 13 percent on surging output in top robusta grower Vietnam. "In 2012/13 the Vietnamese robusta crop came in bigger than many had expected, and now there are expectations of a record 2013/14 crop, and that is pressuring the market," said Andrea Thompson, an analyst with CoffeeNetwork, part of INTL FC Stone.

WORLD AWASH IN SUGAR Raw sugar futures saw a third straight year of big losses as they ended 2013 down 16 percent, also weighed down by huge global supplies. ICE March raw sugar futures closed at 16.41 cents a lb, up 0.2 percent from the previous day and recovering from last week's over three-year low of 15.86 cents a lb on short-covering as prices hovered near technically oversold conditions.

Speculators drove their bearish position in ICE raw sugar contracts to record levels as the world's top producers reaped bumper crops and expectations grew that the world will see a fourth straight year of surplus. "For sugar, the biggest issue has been the spectacular cane production out of Brazil. That opened the door for a lot of oversupply," said Sterling Smith, a futures specialist with Citigroup in Chicago. Hefty output in India and Thailand also weighed, and traders expect to a fourth consecutive year of surplus in the 2013/14 crop year.

ICE raw sugar prices whipsawed as speculators switched to a record net long position and then back to a net short position in the fourth quarter of 2013. Liffe March white sugar closed at $449.00 per tonne, up 0.7 percent from the previous day, but ended the year down 14 percent.

Copyright Reuters, 2014


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