Arabica coffee jumps

Arabica coffee futures on ICE jumped more than 2 percent on Monday as dealers took profits on short positions after the market showed signs of recovering from a drop to 17-month lows, while US cocoa closed lower on heavy position rolling.Raw sugar ended little changed in choppy dealings. May arabica coffee futures on ICE rose 3.75 cents, or 2.1 percent, to finish at $1.8620 per lb.
"The shorts are taking profits, that's why the (arabica) market's rallying," said Nick Gentile, chief trading officer at Atlantic Capital Advisors, a commodity fund in New Jersey. "Specs are buying coffee back at $1.85, so they're making a lot of money on coffee," he said.
Arabica futures have dropped more than 40 percent from the highs reached in May 2011, when the market rose above $3 per lb. The benchmark May contract fell to a 17-month low on March 22 at $1.7445 per lb and has made volatile swings but remained within a 14-cent range ever since.
On Friday arabica futures prices jumped 4 percent after Brazil's government said it would increase loans to farmers, a move that could keep coffee beans off the market and support prices. But Keith Flury, a senior analyst with Rabobank, said arabica prices could fall further in the coming weeks, potentially to around $1.70 a lb, due to producer selling from the coming Brazilian harvest. "We expect to see a better supply of coffee coming out in 2012/13 and (this will) result in a lower price," he said.
However, he said, worries over frost risks in Brazil could emerge in coming months, which would underpin prices. Benchmark Liffe May robusta coffee futures rose $10 to finish at $2,036 per tonne. Speculators extended net long positions in robusta coffee and cocoa futures and options on NYSE Liffe in the week to March 27, and cut slightly cut their net long position in white sugar, exchange data showed.
Cocoa futures on ICE were little changed but volume was heavy as May/July spreading dominated the session. May fell $32 or 1.4 percent, to finish at $2,187 a tonne. Total volume exceeded 43,197 lots, the highest since February 3. The market was choppy, underpinned by concerns that dry weather might hurt the mid-crop in Ivory Coast, while record high ICE warehouse stocks and plentiful global stocks added some pressure. "The short position's pretty large with the specs. There are five million bags of stocks so people have shorted against that, so they need to role," Gentile said.
"The short position that needs to role against the index longs might almost be twice the size." The total bags of cocoa reported by ICE Futures US inched up 1,728 bags to 5,393,598 bags on March 30, the highest on ICE's records that date back to 1986. "Bean arrivals have been pretty decent from Ivory Coast and Ghana, which suggests that supplies are ample," Flury said. Cocoa arrivals at ports in top grower Ivory Coast reached around 1,039,000 tonnes by March 31, exporters estimated, compared with 1,038,928 tonnes in the same period of the previous season.
London May cocoa dropped 16 pounds, or 1.1 percent, to settle at 1,446 pounds per tonne. Raw sugar prices were also choppy and little changed, with benchmark May sitting just beneath the 200-day moving average at 24.89 cents per lb and remaining range bound. "One feels that the market is liable to come under further pressure as the substantial surplus draws nearer, unless the dollar weakens," a senior London-based sugar futures broker said. A softer dollar makes dollar-denominated commodities cheaper in terms of other currencies.
May raw sugar on ICE dropped 0.13 cent to finish at 24.58 cents per lb. Most of the business was in switch trade as players begin to gradually move positions out of the spot May contract since it will go off the board by the end of the month. Alex Oliveira, senior sugar analyst for brokerage Newedge USA, said most players are waiting for the start of the cane harvest in the premier centre-south cane region of top producer and exporter Brazil.
The sugar market kept a close watch on the crop outlook in top producer and exporter Brazil. "It seems now to be (an) accepted fact that mills there will open the crush 3 or 4 weeks behind schedule," said Nick Penney of brokerage Sucden Financial. "It is rain that is now expected to hamper initial operations, although it would be welcome for crop development later on in the harvest," he added. Speculators raised their net long position in sugar by 2,285 contracts to a four-week high 82,956 on ICE Futures US in the week to March 27. London May white sugar futures closed down 50 cents at $643.10 per tonne.