Cocoa rallies, takes back prior session's steep losses

Cocoa futures on ICE rallied 3 percent on Thursday, recouping the prior session's sharp losses and lifting the spot London contract's premium over September, as the markets found short-term support levels. September London cocoa settled up 52 pounds, or 3 percent, at 1,809 pounds per tonne. It fell 2.6 percent on Wednesday.
This lifted the July premium over September as high as 93 pounds, from a $78 pound discount earlier this month. The rally reflected strike prices at 1,800 pounds and 1,850 pounds in July options, which will expire on Friday, traders said.
The weaker British pound against the US dollar also supported the London market, traders said.
September New York cocoa settled up $71, or 3 percent, at $2,451 per tonne. The contract fell 3.7 percent on Wednesday.
"I think it's a technical move, but it is pretty impressive," said Jack Scoville, vice president with Price Futures Group in Chicago.
The contract found support above this month's low of $2,320, traders said.
The second-position contract was on track to end the second quarter down 5.4 percent, in contrast to first-quarter gains of 36 percent, as crop weather improved in West Africa.
October raw sugar settled up 0.2 cent, or 1.7 percent, at 12.25 cents per lb.
While prices were supported by some concern about dry weather in top grower Brazil as well as the session's earlier strength in that country's currency, the market focused on the July raw sugar expiry on Friday.
Brazil was expected to be the largest origin to be delivered against the contract, with some Guatemalan sugar as well, dealers said.
July open interest fell sharply by 21,689 lots to 22,468 lots on Wednesday, ICE data show. On Thursday, it closed at a 0.37-cent discount to October, versus 0.33 cent on Wednesday.
October white sugar settled up $6.50, or 1.9 percent, at $344 per tonne.
"It feels like some of the system funds have been more active," said one European dealer. "But there's no physical activity at the moment."
September robusta coffee settled down $8, or 0.5 percent, at $1,697 per tonne.
September arabica coffee settled down 1.7 cent, or 1.5 percent, at $1.1575 per lb. It was on track to close the second quarter down 3.7 percent, its third straight quarterly drop as top grower Brazil harvests what is widely expected to be a record coffee crop.