US cocoa futures rallied over 3 percent on Thursday, closing at a two-week high after breaking through resistance with a boost from heavy options-related dealings. Sugar reversed to close modestly higher, following a report from top grower Brazil's cane industry association that showed output from the world's premium sugar growing area will be down sharply from a year ago. Coffee turned quietly higher.
ICE July cocoa rose $48, or 1.6 percent, to close at $3,010 per tonne, after peaking at a two-week high of $3,062 a tonne. Volume was heavy despite thin dealings in the rest of the softs complex, with buy-stops triggered in ICE July cocoa above resistance at $3,000, and then again around the 200-day moving average at $3,044. The contract had been trading below this key level for the past 10 sessions.
"Today when the market went through the $3,000 level, then the short (options) call position basically had to buy delta in to rebalance their position," said one veteran US cocoa dealer. ICE July raw sugar futures turned up inched up 0.05 cent to settle at 22.69 cents a lb. Liffe August white sugar closed up $2 at $650 per tonne. Sugar output in Brazil's center-south totalled 2.36 million tonnes from the start of the 2011/12 season through May 16, down 46.7 percent from the same period in 2010, cane industry association Unica said late in the session.
Dealers noted the whites-over-raws premium had risen this week on short covering to around $150 per tonne between Liffe August white sugar futures and July ICE raw sugar futures, which boosted returns from refining. Raw sugar prices were weak for most of the session on combined mild profit-taking and investor sales inspired by weak stock and crude prices.
The discouragement provided by US economic data and the weak tone of financial markets caused some "spillover into the sugar market as well," said Jack Scoville, senior analyst for brokers The Price Group in Chicago. Some bullish impetus should have come from news of a 200,000 tonne tender for raw and white sugar voted upon by a European Union committee.
ICE coffee prices have fallen by around 14 percent since hitting a 34-year high of $3.0890 a lb on May 3. While the market has been underpinned by a shortage of high quality beans, it was unable to withstand the commodity-wide sell off earlier this month. ICE July arabica coffee rose 0.75 cent to finish at $2.6560 per lb.