Liffe May cocoa ended off 7 pounds at 2,350 pounds a tonne on Thursday after earlier hitting 2,368 pounds, the highest level for the benchmark second month since July 2010. Market focus remains on turmoil in top grower Ivory Coast as fighting erupted in the west of the country on Thursday.
Liffe May robusta coffee ended down $39 at $2,329 a tonne. Market suffering setback after rising to the highest levels in nearly three years earlier this week but retreat expected to be shortlived with fundamentals still supportive. Liffe May white sugar rises $2.40 to close at $705.00 a tonne. Market consolidating after prior session's setback as dealers eye Monday's expiry of the March raw sugar contract on ICE.
The cocoa sector in Ivory Coast has been sucked into a post-election power struggle that threatens to reignite civil war, as terrified residents fled shooting in an Abidjan neighbourhood and fighting erupted in Ivory Coast's west. "If demand increases against the current backdrop in Cote d'Ivoire (Ivory Coast), then markets could rally further," Abah Ofon, analyst at Standard Chartered Bank, said.
The market remained in backwardation, when nearby contracts are more expensive than deferreds, typically indicating supply tightness or concerns. The May premium a $65 compared to July, slightly wider than $64 Wednesday. "I think (the risk premium) is now fully into the market so the question now is where do we go from here," one veteran US cocoa dealer said.
"A lot of the shorts have no money in the market right now. They've been selling, selling, selling and the market's been going against them, so you start to worry about the health of the shorts in the market." Colombia's coffee production this year is expected to reach at least 9 million 60-kg bags, the highest level since 2008, as better weather helps flowering, the country's coffee federation said.
"News from Colombia regarding the health of the crop has been encouraging but the market will prefer to see this in physical stocks," Ofon said. Dealers said that coffee roasters have been increasing the use of cheaper robusta coffee in their blends where possible. Sugar futures were also supported by news that the European Union has ditched plans for a reduced-duty tendering process for sugar imports, in favour of a fixed 300,000-tonne import quota with duties set at zero.
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