Liffe coffee falls, May premium collapses

Liffe May robusta coffee ended $82 lower at $2,339 a tonne on Monday as the premium on the contract over July collapsed to close at $31. Heavy selling of both May flat prices and the May/July spread weighed. Liffe July cocoa ended 5 pounds higher at 1,955 pounds a tonne, paring earlier gains. The market was supported by continued conflict in Ivory Coast as dealers expectations of a resolution over the weekend were not met.
Liffe May white sugar rose $3.00 to close at $716.20 a tonne. Dealers remained focused on top producer Brazil's harvest conditions after wet weather delays. Forces backing Ouattara began a fresh assault to remove Gbagbo from his last stronghold in Abidjan while France ordered more troops into the West African country to protect civilians.
Sugar futures rose on investor buying supported by other commodity markets, and coffee fell on investor liquidation, bringing the premium of the robusta's spot contract down more than 80 percent from last month's peak. Cocoa prices pared earlier gains after market expectations of a resolution to Ivory Coast's conflict were not met, and as ICE futures held key support and saw a volume boost from May/July spreading ahead of the spot contract's first notice day April 15.
"We're seeing a continuation to the upside just on technical buying," said Boyd Cruel, softs analyst for Vision Financial Markets in Chicago. Strong support at $2,900-$2,925 per tonne, basis May, kept the market firm after falling nearly 23 percent from the March 4 32-year high at $3,775.
"On Friday some big cities were being controlled by Ouattara's soldiers and everybody was expecting Abidjan to fall during the weekend. It didn't, so the market has bounced," a London-based broker said, explaining the higher prices earlier in the day. "If the situation was to come back to normal we would see the market coming back down to around 1,850 pounds a tonne. Industry cover is at around six months which is fairly standard ... it's fairly comfortable."
Raw sugar futures on ICE rose, tracking gains in other commodity markets, such as metals, and dealers saw key resistance at 28.20 cents a lb. "It seems safer to sell a rally than buy a dip at present," said Thomas Kujawa of brokerage Sucden Financial. Dealers kept a close watch on the harvest outlook in top producer Brazil where rains have caused some harvest delays.
"The delay in the Brazilian harvest and a long tail (late harvesting) in Thailand are cancelling each other out in terms of their market impact," one sugar futures dealer said. "We've seen a fairly big amount of speculator liquidation in New York and London," the London-based broker said. The widening spread between London and New York prices could relate to Brazil's impending frost season which can see a risk premium become factored into arabica prices, although this is a seasonally lower time for arabica. In robustas the May premium over July collapsed to around $30, after trading as wide as around $200 intraday last month, as selling pressure weighed.