Liffe cocoa slightly lower, EU sanctions eyed

Cocoa futures on Liffe ended slightly lower on Monday as cocoa flowed out of West Africa, while dealers noted uncertainty about the impact on supplies of European Union sanctions against top grower Ivory Coast. Robusta coffee futures edged up, with the market underpinned by the large discount of robustas to arabicas, while London sugar futures rose as the fate of Indian exports remained unclear and large consumer Indonesia increased sugar imports.
EU-registered vessels have been barred from all new financial dealings with Ivory Coast's two main cocoa-exporting ports, EU sources said on Monday, as part of fresh sanctions imposed after November's contested election. Dealers said the extent to which EU sanctions would disrupt the operation of the ports remained uncertain. "This is certainly what we are trying to find out right now. It is not very clear," one London cocoa dealer said. May cocoa on Liffe ended 8 pounds lower at 1,999 pounds a tonne.
"The ports of Abidjan and San Pedro are major exit points for cocoa exports. So (EU sanctions) are going to make everyone feel more uncertain," VM Group analyst Gary Mead said. The chief of Ivory Coast's main cocoa-exporting port Abidjan played down its inclusion on an EU sanctions list on Monday, saying the only victims would be European firms contracted to carry out work at the port.
Dealers said that with a strong current flow out of West Africa, prices declined early on hedge selling. May futures falling to a low of 1,972 pounds a tonne before a late rally trimmed losses. Exporters estimated on Monday that cocoa arrivals in Ivory Coast had risen to around 744,000 tonnes by January 16, compared with 726,485 tonnes in the same period of the previous season, and arrivals last week were more than double last year's level.
Volumes on Liffe were light, with US markets shut for Martin Luther King Jr. day. London robusta coffee futures rose, boosted by industry buying that was taking advantage of robusta's discount compared to higher-quality arabicas, dealers said. Weather-related supply disruptions in key producers Brazil and Indonesia sent arabica prices to a 13-1/2-year high last week, while robustas hit a 2-1/4-year peak.
There is also concern about the 2011 supply from Colombia, the top producer of high-quality washed arabica. The country went into its third straight year of significantly lower production due to adverse weather and a rejuvenation programme that has taken many trees out of production.
Market participants said coffee roasters may seek to substitute cheaper robusta for arabica in their coffee blends, though robusta price gains should be limited. "I think robusta may recover some of its losses versus arabica. There's no shortage of robusta; there's only a shortage of arabica," VM Group analyst Mead said.
"I see (robusta) being pushed up by more commercial buying but not by more speculative buying." Liffe robusta coffee futures for March ended $16 higher at $2,140 per tonne after last week hitting $2,185, the highest level for the benchmark second month since September 2008.
White sugar futures in London showed mixed trends with the nearby premium edging up as the focus remained on whether exports from India would be delayed. London March white sugar settled $1.20 higher at $774.20 per tonne while May finished $1.60 lower at $738.30 per tonne.
The Indian government could delay 500,000 tonnes of sugar exports, worried about spiralling food inflation, which has hit millions of poor people and led to protests in eastern India on Monday. "Sugar is not to blame for this (food) inflation, but it's part of a broader package," a London-based trader said. "Anything that reduces domestic supplies could be blamed. ... If these protests spread to other parts of India, it will ratchet up the pressure on the government not to commit to exports."