Arabicas end at 3-1/2 month high, sugar drops

Arabica coffee futures closed at a 3-1/2-month high on Tuesday, rising for the 16th straight session, while raw sugar fell in rangebound trade after investor buying subsided. Cocoa prices were mixed, with weak sterling against the US dollar weighing on the New York market and helping to lift London's prices.
Arabica coffee futures reversed lower on profit-taking but returned back to their highs after a bout of position-squaring ahead of the US Labour Day weekend, with the recent run-up fuelled by fund and speculator buying. "It's healthy profit-taking. It's not going to be long-lasting," said Shawn Hackett, president of Hackett Financial Advisors in Florida.
"Coffee's just having an amazing run-up. It's going to have a correction somewhere along the way." The market continued to be viewed as bullish medium-term as tight supplies of washed beans underpinned prices. "Speculation and improvement in risk appetite - which also drove other commodity markets and financial markets higher - has pushed up arabicas," Carsten Fritsch, analyst at Commerzbank, said. December arabica coffee on ICE rose 2.25 cents, or 0.8 percent, to finish at $2.8670 per lb, the strongest close since May 10.
Dealers and analysts questioned whether the rally was sustainable given a lack of fundamental reasons for higher prices, although concerns about tight supplies of arabica beans remain. "Coffee prices got ahead of themselves. I don't see justification for prices of close to $3 a lb, it's much too high since there's no fundamental news out which supported that price rally," Fritsch said.
November robusta coffee on Liffe closed down $10 at $2,352 per tonne. Vietnamese robusta coffee production is expected to rise to 21.5 million 60-kg bags in 2011/12, ABN Amro/VM Group said. Raw sugar eased in choppy dealings with some pressure earlier from Brazil's decision to cut its ethanol blend, as the market remained prone to sharp moves on low volumes.
The market ground higher intraday on investor buying but stayed in a band since many players seem to have taken off for end-of-the-summer holidays. The market is shut on Monday for US Labour Day. "It could stay (rangebound) for a bit," said The Price Group analyst Jack Scoville, who added that sugar likely received a slight boost as well from nearby demand. Factors such as the smaller Brazilian cane crop, questions over India's sugar export plans and Chinese sugar imports are offset by expectations of bigger sugar harvests in several countries, analysts said.
October raw sugar futures on ICE finished down 0.27 cent at 29.62 cents per lb, after climbing to a session high at 30.40, still well below last week's contract peak of 31.85 cents a lb. October white sugar futures on Liffe closed down $6.60 at $774 per tonne. ICE cocoa futures declined, gaining downward momentum after falling through the 200-day moving average around $3,110 per tonne for the second time in the past week, and then pushing briefly below the 100-day moving average around $3,064.
Dealers said plentiful supplies following a large global surplus in 2010/11 were bearish although focus was turning to 2011/12, when a global deficit is widely expected. Sterling slipped, weighing on US cocoa futures and giving a lift to the London market. British mortgage and consumer credit data pointed to still-lacklustre economic growth, with the pound vulnerable to further weakness as investors and speculators focused on shaky UK fundamentals. December cocoa on ICE closed down $33, or 1 percent, at $3,102 per tonne. Liffe December cocoa gained 10 pounds to finish at 1,949 pounds a tonne.