NEW YORK/LONDON: US cocoa futures extended gains on Thursday, reaching their highest since mid-November on follow-through buying, while sugar and arabica coffee firmed after the US Federal Reserve committed to keep interest rates low.
Stock markets and commodities climbed after the Fed's announcement on Wednesday, spurring selling in the US dollar that brought it to a five-week low against other major currencies.
The dollar's weakness against sterling helped lift dollar-denominated ICE cocoa and weighed on Liffe cocoa, which deals in pounds.
March cocoa on ICE closed up $30, or 1.2 percent, at $2,452 a tonne, the highest settlement for the spot contract since Nov. 14.
(Graphic on cocoa prices: http://link.reuters.com/qyh36s)
"Cocoa continues to climb on technicals and follow-through buying as it crossed through our initial upside target," said Bill Raffety, senior analyst for futures brokerage Penson Futures, referring to chart-based buying after the March contract climbed above $2,400 this week.
"Fundamentally, it is not justified unless the dry weather continues in West Africa."
The move higher began on Tuesday when ICE and Liffe cocoa futures jumped 7 percent intraday, fuelled by short-covering as the crop outlook in top grower Ivory Coast appeared to be dimming, dealers said.
"There is anticipation that bean arrivals in Ivory Coast will be slow," said Keith Flury, a senior analyst with Rabobank, anticipating a global 2011/12 (October/September) cocoa deficit of 100,000 tonnes.
Demand for cocoa is widely expected to surpass supply in the current crop year, helping prices to recover some of the ground lost last year, a Reuters poll of 20 analysts and dealers showed.
London March cocoa inched up 2 pounds to finish at 1,591 pounds per tonne.
Raw sugar futures rose but came off highs as producer sales pared the market's gains, dealers said.
"It's having some trouble keeping itself up," said Jack Scoville, senior analyst at The Price Group.
The flow of supplies from India, the world's No. 2 producer which has gathered a bumper crop, also capped sugar prices, traders said. Rains in top producer Brazil served as a bearish factor for sugar.
March raw sugar futures on ICE climbed 0.22 cent, or 0.9 percent, to finish at 24.73 cents a lb. The contract rose to 25.21 cents on Tuesday, the highest for the front month since mid-November.
"Macro factors are helping as the dollar weakens," said Nick Penney of brokerage Sucden Financial.
Extending New York sugar futures trading session by two hours from Jan. 30 will offer Asian consumers a chance to hedge on the exchange which sets the tone for global prices, but liquidity may take some time to pick up.
Mexican sugar production is likely to slip this season after a severe drought sweeping across the country hit the cane crop, the national cane growers union said on Wednesday.
London March white sugar futures closed up $2.90 at $648.40 per tonne.
Arabica coffee prices on ICE rose with March settling up 2.50 cents, or 1.2 percent, at $2.1970 per lb, supported by the weaker dollar.
"Coffee made another attempt to advance this morning as they did yesterday but so far there is no follow-through buying as they struggle to stay in positive territory," Raffety said.
Dealers said prices remained underpinned by tight supplies although fundamentals may deteriorate as the year progresses.
March robusta coffee on Liffe fell $17, or 0.9 percent, to close at $1,872 a tonne.
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