NEW YORK/LONDON: London robusta coffee premiums continued to soar on Wednesday, while cocoa jumped roughly 5 percent as West African arrivals slowed.
The benchmark arabica coffee contract extended its losses, hitting its lowest levels in more than 14 months and flirting with the psychological $2-per-lb level. Sugar was mixed in choppy, rangebound dealings.
Liffe robusta coffee dealers eyed the widening premium between the two nearby contracts.
"It seems to be mainly a case of short-covering traders' March position whilst rolling into May, contributing to the blowout in the front-month premium," said Jack Pollard of brokerage Sucden Financial.
The March contract widened to close at $164 per tonne premium over May, compared with a premium of $156 per tonne at the close on Tuesday.
March robusta coffee on Liffe closed up $33, or 1.6 percent, to close at $2,143 a tonne.
Arabica coffee futures on ICE fell for the sixth straight session, nearly reaching $2 per lb, basis May, as funds and investors liquidated longs and sold shorts, dealers said.
"Roasters are really stepping up their buying needs. They're buying forward months as well, as far out as July," said one veteran coffee dealer in New York.
"This is definitely a technical move. Speculators are selling into weakness. Origin is not in the market at all."
May arabica futures dropped 3.60 cents, or 1.8 percent, to close at $2.0255 per lb, the weakest settlement for the second position since November 2010.
The contract fell 2.8 percent to a session low of $2.0040, around the 61.8 percent Fibonacci retracement level for the second position. Total volume was heavy, exceeding 39,000 lots and more than double the 30-day average, preliminary Thomson Reuters data showed.
March/May spreading ahead of the spot contract's first notice day next week, helped lift volume, dealers said.
Cocoa futures also saw a big move in heavy volume, but in the opposite direction, with the US market soaring well above 5 percent on growing concern about supplies as arrivals slowed in key growing region West Africa.
"Everybody's talking about lack of offers coming out of West Africa right now. I know it's an issue. I saw Nigeria's harvest shut down last week, which is on the early side," said Jack Scoville, vice-president at The Price Group in Chicago.
Cocoa farmgate prices in top grower Ivory Coast's main growing regions were mixed last week, with thin volumes at the end of the main crop supporting prices in some areas and poor quality of beans depressing them elsewhere, farmers and buyers said.
"I think people have been figuring they could buy the harvest lows and there would be plenty of cocoa. Now we have potentially dicey midcrop here," Scoville said.
ICE benchmark May cocoa surged $121, or 5.3 percent, to end at $2,391 a tonne. Liffe May cocoa futures jumped to close up 72 pounds, or 4.9 percent, at 1,555 pounds a tonne.
In Liffe cocoa, dealers eyed the narrowing of the discount between London's March and May cocoa contracts, which closed at 3 pounds, from 4 pounds on Tuesday.
"The tightening of the structure hasn't gone unnoticed and could be an indicator that there are concerns over the dwindling Liffe certified stocks," said a London-based broker.
Another London-based dealer said: "A lot of it (buying) is short covering. I don't anticipate the March-May widening much because of the low stocks environment."
Valid cocoa stocks in NYSE Liffe's nominated warehouses fell to 59,400 tonnes as of Feb. 6 from 91,800 tonnes on Jan. 23, exchange data showed last week.
March raw sugar futures on ICE closed higher in choppy dealings as the market remained bound between 24 and 25 cents. March rose 0.24 cent, or 1 percent, to end at 24.49 cents a lb.
Dealers said recent talk in the market of nearby supply tightness during the inter-crop period in top producer Brazil had been overdone.
The state-run Thai Cane and Sugar Corp (TCSC) will open a tender to sell 67,333 tonnes of raw sugar from the next 2012/13 crop next week, a senior TCSC official said.
London May white sugar futures fell $6.10, or 1 percent, to settle at $616.70 per tonne.
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