Sugar rallies

Raw sugar futures on ICE rallied another 3 percent in heavy volume on Thursday, buoyed by short-covering and strong technical support, while New York cocoa extended losses to an 8-1/2-month low on weak charts. Arabica coffee turned higher in late-day dealings after tapping a two-month low as the firm US dollar provided pressure, while robusta was weighed down by expectations of a pickup in Vietnamese exports.
March raw sugar futures settled up 0.41 cent, or 2.8 percent, at 14.88 cents per lb, building onto Wednesday's rally. The move lifted the March/May spread to a 0.45-cent premium, the highest since December 8. The spot contract has seen its biggest two-day rally in 10 weeks, rebounding from Tuesday's fall to 13.93 cents that matched the November 9 low. This formed a double bottom and strong technical support, traders said.
Thursday was the last day of a five-day index rebalancing, with traders estimating around 50,000 contracts would be sold. Speculators were believed to have sold into this expectation and were now covering their short positions, traders said. Resistance was felt just above the 50-day moving average. March white sugar settled up $5.40, or 1.3 percent, at $428.40 per tonne.
Sugar fundamentals are also increasingly bullish as some Indian farmers replaced cane with less water-intensive crops and strong flows of white sugar are believed to be moving to Myanmar and China. "I think it is related to the weather, talking up the drought, issues in China and India," said Judith Ganes-Chase, president of J. Ganes Consulting, about sugar's rally.
"At the same time, though, Brazil is trying to squeeze every bit out of the current harvest." March New York cocoa settled down $35, or 1.2 percent, at $2,857 per tonne, after falling to $2,844, the lowest since April 2015. March London cocoa settled down 12 pounds, or 0.6 percent, at 2,061 pounds per tonne. Traders awaited fourth-quarter European grind data on Friday, expected to show a year-on-year rise of between 2 and 5 percent.
Robusta futures on ICE dipped on expectations for higher shipments in January after the 2015-16 harvest in top producer Vietnam. March robusta settled down $19, or 1.3 percent, at $1,438 per tonne. Global 2015-16 coffee production is forecast to rise to 143.4 million bags, the International Coffee Organisation said in its first estimate for the crop. March arabica futures settled up 1.1 cent, or 1 percent, at $1.159 per lb, after touching a contract low of $1.1350.