LONDON: Arabica coffee futures on ICE rose on Wednesday, heading towards this week's seven-month highs as a weaker dollar and lingering worries over frost risk in top producer Brazil prompted funds to cover their shorts.
COFFEE
September arabica coffee rose 2.9 cents, or 2.6%, to $1.1245 per lb at 1342 GMT, after touching $1.1410 on Monday, its highest since Nov. 29.
South and central Brazil are expected to be hit by the coldest temperatures of the year in coming days, and frost will likely form in some coffee areas, but it is unlikely to be widespread and will not be intense, forecasts indicate.
"Industry is not panicking at all about this frost but overall prices are still pretty cheap so the market needed some kind of (rebalancing). We're probably back to where we should be if we look at fundamentals," said a dealer.
In the wider markets, the dollar edged lower, undermined by the steady fall in US Treasury bond yields, fading optimism over the China-US trade deal and the possibility of fresh tariff hostilities with Europe.
A weaker dollar and stronger real can discourage selling by Brazilian producers.
In industry news, companies such as Nestle are willing to pay a premium for Zimbabwe's coffee beans, leading small-scale farmers to return to a sector that was all-but destroyed under former President Robert Mugabe.
September robusta coffee rose $13, or 0.9%, to $1,457 per tonne, after touching a more than three-week peak of $1,489 on Monday.
SUGAR
October raw sugar was flat at 12.35 cents per lb, having reached its lowest since end-May on Tuesday.
"Following yesterday's rather unexpected drop the likelihood of any significant rally seems limited. On the other hand, there would seem little reason for prices to drop further," said a dealer.
There are continued concerns that a weaker-than-normal monsoon in India, a top sugar producer, could curtail sugar production there just as Brazil, another top producer, reduces its output in favour of ethanol.
August white sugar dipped $0.20, or 0.1pc, to $319.50 per tonne.
COCOA
September New York cocoa fell $4, or 0.2pc, to $2,468 per tonne.
September London cocoa was flat at 1,829 pounds per tonne.
US food maker Mars Inc. supports a decision by Ivory Coast and Ghana to set a floor price for their cocoa exports, becoming one of the first major chocolate companies to back the initiative.
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