Markets

Arabica up for 13th day, sugar extends correction

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Raw sugar slid as much as 4 percent in the second straight day of a steep correction, with cocoa also reeling from investor sales.

New York's December arabica coffee futures gained 1.75 cents to end at $2.755 a lb, the highest close since June 14. Its session peak of $2.779 was a 2-1/2 month high.

But London's November robusta coffee on Liffe dipped $12 to close at $2,362 per tonne.

"Coffee is running fairly strong (and) supplies are quite tight," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management in Oregon.

Most of the focus is on Colombia, the world's top producer of high-quality arabica beans, where poor weather and a tree renovation program cut its coffee output in 2009 and 2010.

Coffee growers have forecast this year's output at 9.0-9.5 million 60-kg bags, more than the 8.9 million bags produced last year but below historical averages of more than 11 million bags.

Arabica coffee traded at its highest level since June 3, but the market pared gains on profit-taking and pressure from a weak commodity complex.

"Previously there was a bit of concern about the lack of increase in Colombian production as well as the frost conditions in Brazil," said Mu Li, coffee analyst with CPM Group in New York.

She added that concerns remained about tight supplies of washed arabica beans, and roasters may be looking to restock ahead of seasonally higher winter demand.

SUGAR DOWN FOR 2ND DAY, COCOA WEAKER

Sugar futures declined as raws suffered from a paucity of nearby demand, brokers said.

"I see concern over demand not chasing the market up," said Mike McDougall, vice-president for brokerage Newedge USA.

New York's October raw sugar futures fell 0.52 cent to finish at 29.66 cents a lb, hitting a session low of 28.92 cents. London's October white sugar contract dropped $13.40 to finish at $771.20 a tonne.

Brazil's small sugar crop supported the market.

"In the near term, we expect prices to be supported in Q3 on supply downgrades from Brazil but for prices to ease through Q4 and into early next year," Barclays Capital said in a note.

"However, prices and sentiment are likely to remain choppy, swinging between the implications of a weak Brazilian crop on the one hand and robust supply growth across other key producers on the other."

Dealers awaited the latest information on Brazil's harvest from the top sugar producer's cane industry association UNICA, due at 1700 GMT.

US cocoa futures fell after rising nearly 11 percent in the past two weeks, with the key December contract tumbling below the 100-day moving average around $3,062 per tonne.

"There was a technical short-covering rally the past two to three days and now it has fallen out of bed. Cocoa rolled over with the rest of the board as crude got nailed," a veteran cocoa dealer said.

A weak pound against the dollar was also seen as bearish.

"Cocoa production this year has been very good. There's some anticipation that next season may not be as good," Natixis analyst Lysu Paez Cortez said.

 

Copyright Reuters, 2011