NEW YORK/LONDON: Robusta coffee futures firmed Thursday, with the focus on a wide premium between the two nearby contracts, while arabica coffee extended losses for a seventh straight day and fell below $2 per lb.
ICE cocoa consolidated higher, with the market extending its inversion after a 5 percent rally on Wednesday on concerns over slow West African arrivals. ICE sugar firmed in rangebound dealings.
Robusta coffee futures rose, with dealers expecting the higher price to encourage cash sales from top producer Vietnam.
"I think the balance will shift to the sellers, and we will see downside momentum moving forward," said Keith Flury, a senior analyst with Rabobank.
The March contract widened and later eased to close at a $128 per tonne premium over May, compared with a premium of $169 per tonne at the close on Wednesday.
One market participant has built a long position on March robusta that could equate to a delivery of a large chunk of the certified coffee available and exceed proposed delivery limits due to be enforced by the exchange later in the year, traders said.
May robusta coffee on Liffe closed up $60, or 3 percent, at $2,039 a tonne.
Farmers in main robusta producer Vietnam started to offer more beans this week because of rallies in London futures, while roasters asked for cheaper premiums for Indonesian coffee as the harvest progresses, dealers said.
Arabica coffee futures on ICE dropped below the psychological $2-per-lb level, basis May, as dealers eyed forecasts for a large Brazilian harvest this year.
"The market has been bearish for quite a while now. We've basically scared away a lot of potential buyers," said Sterling Smith, analyst with Country Hedging in Minnesota.
May fell 2.35 cents, or 1.2 percent, to $2.0020 per lb by 12:43 p.m. EST (1743 GMT), after breaching support at $2. Earlier, it dropped to $1.9780, the lowest for the second-position contract since November 2010.
The premium of the spot arabica contract over robusta fell to around 98 cents per lb, the lowest since October 2010.
Commerzbank said the arabicas market could be oversold.
"Arabicas are clearly being influenced by expectations of a good harvest in Brazil, due to start in April and set to be a high-yield year within the two-year crop cycle," Commerzbank said in a daily market report.
"In view of the currently tight supply in the wake of the disappointing harvest in Colombia, we believe the price slump to be exaggerated and anticipate a recovery in the near future."
NYSE Liffe stepped up its drive to tighten regulation of its cocoa, robusta coffee, white sugar and feed wheat contracts on Thursday, to echo the stricter regime on the New York-based Intercontinental Exchange (ICE).
COCOA CORRECTS
Cocoa futures on ICE turned higher, with May closing up $14 at $2,405 a tonne. March closed at a $48 premium to May.
"The idea is the weather in Ivory Coast is going to cause some problems and that is pushing us higher," Smith said.
"This market has had several bounces that have proven to be unsustainable."
Cocoa found some follow-through strength after Wednesday's rally, which was driven by growing concern about supplies as arrivals slowed in the key West Africa growing region.
"In cocoa there is a bit of profit-taking after yesterday's substantial rally," Flury said in reference to the session's earlier weakness.
Liffe May cocoa futures closed down 12 pounds at 1,543 pounds a tonne.
Talks on Ivory Coast's sweeping cocoa reform plan have stalled between leading export firms and the authorities over its proposed allowance for transport costs, sources from both sides said on Wednesday.
March raw sugar futures on ICE were firm, standing up 0.2 cent at 24.69 cents a lb, as dealers awaited news about Thai shipments and development of the Brazilian crop.
"It seems destined to bump along sideways until we perhaps trigger stops potentially just around/under 24 cents and just above 25 cents," said Thomas Kujawa of brokerage Sucden Financial.
London May white sugar futures rose $10.30, or 1.7 percent, to settle at $627.00 per tonne in thin turnover of 2,287 lots.
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 on Wednesday.
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