NEW YORK/LONDON: Raw sugar and arabica coffee futures on ICE climbed on Monday, with both markets supported by short covering after falling last week to the lowest levels in more than two years.
Cocoa futures on ICE and Liffe were slightly lower as rains improved the outlook for crops in parts of top-grower Ivory Coast. Speculators cutting their long positions added pressure.
March raw sugar futures on ICE gained 0.40 cents, or 2.1 percent, to close at 19.41 cents a lb. The contract dipped last week to a 18.31 cents, the lowest level for the benchmark front month since August 2010.
Dealers said a huge speculative net short position had left the market susceptible to sporadic short covering rallies.
"The commitment of traders report showed there was quite a few people short and we've had a little bounce," said a London-based broker.
"It's unlikely to get much higher because each time prices get to 20 cents it gets sold off."
Speculators increased their net short position in raw sugar contracts on ICE Futures US to the largest in more than five years in the week to Dec. 11, US Commodity Futures Trading Commission (CFTC) data showed on Friday.
"We've seen these COT (commitment of traders) induced rallies before and suspect once this is fully digested, normal service on the downside will be resumed," Nick Penney of Sucden Financial said in a market note.
Concerns over whether the US economy will avoid automatic tax hikes and spending cuts in 2013 were expected to cap gains in commodities markets due to the likely negative economic impact on riskier asset classes.
"You will see some short covering now we are back above 19 cents but the majority will wait until you hear from the US (on a deal to avoid the so-called fiscal cliff) before you go long," said Andrey Kryuchenkov, analyst at VTB Capital.
"For the market to regain confidence, people will wait until they hear on that."
March white sugar on Liffe jumped $12.10, or 2.4 percent, to settle at $520.80 per tonne.
ARABICA ADVANCES
March arabica coffee futures on ICE finished up 2.80 cents, or 2 percent, at $1.4595 p er lb. The contract dipped to $1.4220 last week, the lowest level for the then-benchmark second month since June 2010.
"The market is well supported at these levels although it could come down to around $1.30," said a London-based broker, noting there was limited roaster buying.
"Roasters are quite happy at the moment and don't need to do anything much."
Hector Galvan, senior market strategist for RJO Futures in Chicago, said: "I think that arabica is just getting a small profit-taking bounce this morning. The thoughts here are that we could still test lower levels before we finish the year."
March robusta coffee futures closed down $31, or 1.7 percent, at $1,841 a tonne.
Dealers said they were continuing to keep a close watch on January's premium to March, which has widened to around $50 in recent sessions, partly due to depleted certified stocks. It narrowed to $22 on Monday.
"This is a reflection of what's happening on the physical market, certified stocks are low," said a London-based broker, adding the premium could widen further to $60-$70.
Cocoa futures eased in rangebound dealings.
March futures on ICE settled down $10, or 0.4 percent, at $2,425 a tonne. May cocoa on Liffe ended down 12 pounds, or 0.8 percent, at 1,539 pounds a tonne.
"Cocoa is trading sideways, but with no negative news and steady sales and movement from West Africa the bears remain in control," Galvan said.
Weather was mixed last week across Ivory Coast's main cocoa growing regions with some areas receiving showers while others saw dry, hot conditions, farmers and analysts said.
Center>Copyright Reuters, 2012
Comments
Comments are closed.