Coffee and sugar rise with financial markets

NEW YORK/LONDON: ICE arabica coffee and raw sugar futures rose on Wednesday, clawing back from Tuesday's steep losses, helped by rebounds in other financial markets and a weak dollar, while cocoa fell on profit-taking.

The commodity complex followed US stock markets up, which reversed after three days of losses on hopes the European debt crisis might ease as Germany's top court smoothed the way for Berlin's participation in bailout packages.

The move by Germany helped lift the euro against the US dollar, attracting buying to many dollar-based commodity markets. The Reuters-Jefferies CRB index , a global benchmark for commodities, climbed about 1.3 percent.

"The macro picture is mixed again as stock markets are stronger in the UK and Europe, clawing back some of the losses earlier in the week," said Nick Penney of brokerage Sucden Financial.

ICE arabica coffee futures rose as investors regained some of their appetite for risk after Tuesday's sell-off.

The weaker dollar also gave them a boost, said Hector Galvan, senior market strategist for brokerage RJO Futures in Chicago, referring to coffee and sugar's rise.

ICE December arabica coffee futures were up 0.85 cent, or 0.3 percent, at $2.8180 per lb at 12:22 p.m. EST (1622 GMT), off its session high at $2.8520. The contract tumbled 7.10 cents on Tuesday, the biggest fall in seven weeks.

The prospect of big production in top coffee producer Brazil limited gains, however, said Gary Mead, analyst with VM Group.

Liffe robusta coffee futures reversed lower, pressured by expectations of a big harvest in top producer Vietnam.

November robusta coffee on Liffe was down $4 at $2,168 per tonne.

Up to 100,000 tonnes of robusta coffee bean shipments from Vietnam have been delayed or defaulted in the season ending September, and traders urged Hanoi to take action to prevent such problems from recurring.

ICE raw sugar futures advanced, on bargain-hunting, and a lift from gains in oil and other commodity markets.

Raw sugar futures were firmer on bargain-hunting following the steep sell-off in the previous session.

The sugar market, along with most of the softs complex with the exception of coffee, which continues to be underpinned by tight supply concerns, will continue to be dominated by the gyrations on the macro economic front, analysts said.

"Unless there is something on the global economic situation, I doubt there is anything to drive sugar up," said Country Hedging Inc senior analyst Sterling Smith.

Fundamentally, the shortfall in Brazil production is seen largely offset by larger production in countries like No. 2 exporter Thailand, and Australia, Russia and others.

ICE October raw sugar futures rose 0.33 cent, or 1.2 percent, to 28.62 cents a lb. October white sugar futures on Liffe rose $3.80, or 0.5 percent, to $755.10 per tonne.

PROFIT-TAKING HITS COCOA

Cocoa futures on ICE reversed early gains as investor long-liquidation and origin selling pulled the market into negative territory. Industry buying prevented a steeper fall, dealers said.

ICE December cocoa dropped $34, or 1.1 percent, to settle at $2,954 per tonne. The contract sank $110 on Tuesday, the biggest one-day drop in four months.

Liffe December cocoa finished down 26 pounds at 1,891 pounds per tonne.

Concerns over black pod disease and a lack of migrant workers in top producer Ivory Coast underpinned the market.

Copyright Reuters, 2011