New York cocoa futures fell to their lowest in 3-1/2 years on Tuesday before turning higher as the market began to consolidate after a prolonged slide in prices. Dealers said the decline had been fuelled by funds building net short positions against the backdrop of favourable crop prospects and an anticipated global surplus in the current 2016/17 season (October/September).
March New York cocoa was up $20, or 0.9 percent, at $2,146 a tonne by 1452 GMT after earlier dipping to a low of $2,119, its weakest since April 2013. "I think people are finding their feet with the new year, taking stock of the situation," one London dealer said, adding it remained unclear where the market might find significant support after sliding 34 percent in 2016.
Dealers said crop prospects in top producer Ivory Coast remained favourable although a close watch would be kept on the seasonal Harmattan wind. Last year a strong Harmattan - a dusty wind from the Sahara - caused severe damage to crops but indications so far suggest this year's will be mild. May London cocoa was up 15 pounds or 0.9 percent at 1,765 pounds a tonne.
Raw sugar futures were sharply higher with the market supported partly by diminishing production prospects in India, particularly in the western state of Maharashtra where crops have been hit by drought. More than two dozen mills in Maharashtra have stopped crushing due to cane shortage while many more mills are likely to shut before the end of February, a prooducers' body said on Tuesday. Sugar mills in Maharashtra typically operate between November and April.
Dealers said China's auction of 92,000 tonnes of sugar from state reserves on December 30 was also supportive. Sucden Financial senior trader Nick Penney noted the amount was much lower than the targeted 300,000 tonnes. "This would suggest that imports from the world market continue to be attractive. White sugar imports (into China) especially through its porous border are likely to continue," he said in a market update.
March raws were up 0.66 cents or 3.4 percent at 20.17 cents a lb after climbing to a one-month high of 20.30 cents. March whites were up $12.50, or 2.4 percent at $536.70 per tonne. Robusta coffee futures were lower with the pace of exports from Vietnam set to climb this month ahead of the Tet Lunar New Year holiday. Farmers and local exporters often sell ahead of the holiday to raise cash. March robusta coffee fell $12 or 0.6 percent to $2,126 a tonne, while March arabica futures were down 1.05 cent, or 0.8 percent, at $1.36 per lb.
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