Robusta coffee futures eased on Tuesday, causing the front-month's premium to shift to a small discount, while raw sugar broke through key resistance and hit a three-month high as shorts took cover. ICE cocoa futures jumped to a three-week high, attracting chart-based buying after piercing the 100-day moving average, while white sugar, arabica coffee and Liffe cocoa were also stronger, after a second bailout deal for Greece was agreed upon.
Robusta coffee futures were weak. The March contract traded at a $5 discount to May at 12:35 pm EST (1735 GMT), compared with a premium of $94 per tonne at the close on Friday. "I think it was just funds getting squeezed out of positions," said a London-based broker, noting fund short covering activity helped push the March contract higher last week.
The open interest in the front-month dropped 5,781 lots on Tuesday after high volumes of trading on Monday in the lead up to the contract becoming deliverable on March 1. "It was a decent drop in the open interest, indicative of spread positions being unwound on the March/May," said a second broker. Benchmark May robusta coffee on Liffe was $7 lower at $1,980 a tonne. Top robusta producer Vietnam has just harvested a large crop but exports have been slow.
"The price slump signals that such a high price level simply will not be sustainable given the plentiful supply," Commerzbank said in a daily commodities note. Arabica coffee futures on ICE rose with May up 3.05 cent, or 1.5 percent, at $2.0540 per lb. Raw sugar futures were higher, underpinned by tight supplies in the short term, while expectations of a surplus of sugar in the coming months as Brazil's new crop is harvested capped gains.
"Everything's higher based on the euphoria from the Greeks setting their problems," said Jeff Bauml, a senior vice president with brokerage R.J. O'Brien & Associates in New York. March/May spreading boosted volume ahead of the March contract's first notice day next week, dealers said. Benchmark March raw sugar futures on ICE jumped 0.62 cent, or 2.5 percent, to 25.24 cents a lb, the highest since November 14. The contract sat just below the 200-day moving average at 25.34 cents per lb.
"Although we are approaching the halfway point of the 2011/12 international crop year, prices remain fairly well supported, largely owing to a perceived shortage of export availability against import demand in the early part of 2012," said Rabobank in a report. London May white sugar futures climbed $8.60, or 1.4 percent, to close at $643.20 per tonne.
Cocoa futures rallied, on spillover support from the positive macro sentiment and buying in commodities, with the US market triggering buy-stops at the 100-day moving average $2,410 per tonnes, basis May. Benchmark ICE May cocoa futures surged $79, or 3.4 percent, to finish at $2,424 a tonne, the highest close since January 27. London May cocoa futures closed up 42 pounds at 1,556 pounds a tonne.
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