US MIDDAY: cocoa surges

Cocoa futures jumped on Tuesday as concerns about poor quality beans in top grower Ivory Coast spurred a wave of short-covering in the New York and London markets. Raw sugar marched to a three-week top, but then stalled on producer sales while coffee edged quietly higher. New York's May cocoa contract soared $83, or 3.6 percent, to settle at $2,372 a tonne.
The May contract climbed above the 40-day moving average at $2,333 and then found resistance around the 100-day moving average at $2,350. London's May cocoa futures on Liffe went up 42 pounds, or nearly 3 percent, to end at 1,519 pounds per tonne. "There are small beans at the tail end of the midcrop," said Drew Geraghty, commodity broker at ICAP North America in New Jersey.
Exporters in Ivory Coast said on Monday they were concerned by the rise in the level of Free Fatty Acids (FFA) in the cocoa arriving at the ports there because of the small size and poor quality of beans as a result of a four-month drought. "I think that's what stirred the market here. The rally has really been a short-covering event spurred by the tail end of the crop here," Geraghty said. Sugar futures sputtered after the raws market touched a 3-week high as producer selling stepped up.
May raw sugar on ICE eased 0.05 cent to finish at 25.61 cents per lb, having touched a three-week top of 26.20 cents. London May white sugar futures dropped $2.30 to end at $665.70 per tonne. James Cordier, senior analyst at brokerage Optionsellers.com in Florida, said sugar was a bit overbought so it came off.
But talk of potentially lower-than-expected production in the premiere centre-south region of top producer Brazil limited the downside. "The current rally does show that funds are reluctant to buy into the surplus story and are betting that the problems seen during Brazil's last harvest will be repeated," said Nick Penney of Sucden Financial.
"The producers worry that yields may not be as high as previously expected and further dry weather will exacerbate the problem, even if sucrose content improves," he added. The market was also supported by talk of ongoing dryness in the Brazil's centre-south. "The market is starting to build a bit of a weather premium into the price," said James Kirkup, head of sugar brokerage at ABN Amro Markets.
The state-run Thai Cane and Sugar Corp (TCSC) will issue a tender next week to sell 79,333 tonnes of raw sugar from the next 2012/13 crop, a senior official said on Tuesday. A ministers' panel will review India's sugar exports on March 26, a government source said on Tuesday, raising expectations of more overseas sales of the sweetener from the world's second-biggest producer, which could pressure global prices. May arabicas on ICE went up 0.10 cent to close at $1.836 per lb. Liffe May robusta coffee futures increased $8 to end at $2,032 a tonne.