Sugar rallied more than 4 percent on Tuesday, making it one of the strongest commodities in the Thomson Reuters-Jefferies CRB index on the first trading day of 2012, while cocoa settled mixed. Coffee ended higher after an early dip on profit-taking, joining the firm tone in commodities following stronger-than-expected economic data in the United States, Europe and China that fuelled risk appetite and weakened the US dollar.
Trailing gains in silver, ICE benchmark raw sugar futures were the second-biggest gainers on the global benchmark for commodities, the CRB, for the day. The sweetener got a lift as crude oil rallied on worries about Middle East supplies due to tension between Iran and the United States, dealers said.
March raw sugar jumped 1.1 cents, or 4.7 percent, to 24.40 cents a lb by 12:28 pm EST (1728 GMT), having touched a seven-week high of 24.50 cents. London March white sugar futures were up $24.40, or 4.1 percent, at $626.40 per tonne. "It seems we will get a test of the overhead resistance and some weak shorts will probably be flushed out on a break of 24 cents," said Thomas Kujawa of broker Sucden Financial.
Some dealers cited talk that an index fund was re-weighting in sugar, which should result in net buying of the sweetener. Dealers said the market expected index funds to boost weightings of sugar after last year's price slide. Gains in sugar futures prices were limited by big crops in the EU, Russia, Ukraine, India and Thailand.
Raw sugar tumbled 27.5 percent in 2011, ending the year as one of the weakest markets on the CRB, after having reached a 30-year high at 36.08 cents a lb on February 2, 2011. Speculators switched to a net short position in NYSE Liffe white sugar futures, as of December 28, exchange data showed. ICE March cocoa futures closed up $6 at $2,115, well below the session high at $2,179, with potential upside in prices capped by plentiful nearby African supplies.
"It really is just dealing with the dollar being lower," said Hector Galvan, senior market strategist for RJO Futures in Chicago. Like raw sugar, the US cocoa market was also one of the CRB's weakest performers in 2011, finishing the year down 30.5 percent, the spot contract's biggest annual drop in 12 years. Global economic concern and abundant West African supplies weighed on the market.
London March cocoa reversed to settle down 15 pounds at 1,365 pounds per tonne, on pressure from the firm sterling against the dollar. Cocoa arrivals at ports in Ivory Coast were up around 3 percent by December 31, since the start of the season in October, exporters estimated, from the same period a year ago. Meanwhile, dry and windy weather in most of the country's main growing regions last week, deepened fears about the crop's development after January.
Coffee moved lower, with light profit-taking surprising many dealers, as the market faces a smaller crop in top washed arabica grower Colombia. Coffee futures are known to be highly volatile at times. "People are too apprehensive to jump in there with the futures because they don't want to get beat up and know how fast things can move in the futures," Hector said, adding options dealings pointed to expectations for an upward move in the near future.
ICE May arabica futures reversed up 0.65 cent, or 0.3 percent, to $2.2750 per lb. ICE arabica futures basis the front month finished 2011 down 5.7 percent after a weak performance in the second half of the year. London March robusta coffee futures also changed direction and were up $8, or 0.4 percent at $1,818 per tonne, after being pressured earlier by a big harvest in top producer Vietnam.