ICE sugar corrects lower, coffee consolidates

ICE cocoa futures were higher, boosted by short covering and expectations demand will outstrip supply in 2011/12.

Raw sugar futures on ICE eased, trading below 2-1/2-month highs, as profit taking triggered a correction lower.

"There's some profit taking, this is a small correction in the context of the move higher we've had in the last few sessions," a London-based broker said.

Raw sugar prices have gained around 10 percent in value since Thursday, however this connfounded some dealers who had been bearish the market due to ample sugar supplies being expected as producers respond to historically high prices.

"The expected oversupply on the global sugar market of almost one million tonnes should prevent prices from returning to their highs of over 35 cents marked at the start of the year," Commerzbank said in a daily commodities note.

ICE July raw sugar futures were down 0.32 cent or 1.2 percent to 27.15 cents a lb by 1213 GMT.

Dealers said the market remained supported by the slow start to the Brazilian harvest, and loading delays in Brazil and Thailand.

Liffe August white sugar was down $2.40 or 0.3 percent at $742.00 per tonne

COFFEE STEADY

ICE arabica coffee futures consolidated, trading near a five-month low, under pressure from a weak technical outlook and top producer Brazil's harvest.

Second month arabica coffee futures peaked at a 34-year high in March, while front month futures peaked at a 14-year high, supported by a shortage of high quality beans.

"With a (front month) peak at 306.25 cents per pound, almost as high as 1997's record 320.00, there is a possibility prices will plummet as they did in 1995 and 1998 after the last two massive spike highs," said Nicole Elliott, technical analyst at Mizuho.

"Bearish momentum is close to the strongest in a decade."

Reuters analyst Wang Tao also said New York coffee is expected to continue its fall to $2.4055 per lb, as the bearish momentum is strong.

ICE September arabica coffee was up 1.35 cent or 0.6 percent at $2.4765 per lb at 1214 GMT, while Liffe September robustas were down $3 or 0.1 percent at $2,273 a tonne.

ICE cocoa futures rose, building on recent gains, buoyed by system funds buying back short positions and forecasts for 2011/12 cocoa production being inadequate to meet growing demand.

"It's a mixture of short covering and new long positions to tackle next year's predicted deficit," a London-based dealer said. September cocoa on ICE was up $67 or 2.3 percent at $3,035 a tonne at 1215 GMT. Forecasts for a large global surplus in 2010/11 have kept a lid on the market in recent months, but dealers are starting to look ahead to the 2011/12 season.

"West Africa looks like having an ok crop but it won't mirror this year's crop which was fantastic," said the dealer.

Liffe September cocoa futures were up 39 pounds at 1,896 pounds a tonne

Copyright Reuters, 2011