Arabica coffee futures rallied on Thursday, boosted by renewed buying on US dollar weakness and a stronger Brazilian currency, while New York cocoa rose to its highest in more than six weeks. December arabica coffee settled up 5.1 cent, or 4.5 percent, at $1.178 per lb.
Prices dropped to a three-week low on Wednesday but ended the session in positive territory, which improved the technical structure, dealers said. The market was supported by US dollar weakness and gains in the Brazilian real currency, said Judy Ganes of J. Ganes Consulting.
"As the real is starting to appreciate again, coffee over-reacts to that. At least for the time being, it seems like that sort of trend is dominating," said Carlos Mera, senior commodities analyst at Rabobank. A stronger real supports prices because it discourages producers from hedging supplies by reducing local currency returns on dollar-traded commodities like coffee and sugar.
"Market focus is now shifting forward to prospects for the next crop. Demand continues to be moderately positive," Ganes added. January robusta coffee settled up $37, or 2.2 percent, at $1,712 per tonne. March raw sugar remained unchanged from the previous session at 13.19 cents per lb.
Dealers said markets are recovering on new buying by speculators combined with improved chart signals as prices climbed above key technical levels, and support from the Brazilian currency. While supplies are still ample, market participants noted that recent signs of possible lower output going forward has helped improve sentiment.
"Developments in India, CS Brazil, the EU, Thailand and the weather...are clearly (affecting) the underlying fundamental situation," consultancy Agrilion said in a market update. December white sugar settled down $3.80, or 1.1 percent, at $351.90 a tonne, having fallen to $350.30, its lowest since Oct. 9.
However, dealers said focus remained on looming exports from India. December New York cocoa settled up $30, or 1.3 percent, at $2,264 a tonne, after hitting $2,292, its highest since Sept. 17 as a weaker dollar boosted prices. December London cocoa settled down 19 pounds, or 1.1 percent, to 1,676 pounds a tonne. Focus remained on strong port arrivals in top grower Ivory Coast, which have stoked worries about a surge in supplies, dealers said.
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