London's front-month robusta coffee premium over the second month was largely erased on Monday, while cocoa and white sugar firmed in thin volumes, with US softs markets closed for a holiday. Front-month March robusta coffee futures plunged over 5 percent as concerns lessened about potential tightness in available deliverable supplies.
The March contract ended the day at a premium of about $5 to May, compared with a premium of $94 per tonne at the close on Friday. "This was a short-term play," said Kona Haque, soft commodities analyst with Macquarie Bank, in a reference to a recent buildup in the front-month position by one market operator.
"The Vietnamese (the top robusta producer) are very undersold, so there is a lot of potential for supply from Vietnam to come onto the market. If the Vietnamese want to get a good price for their crop, this is as good a time as any." A London coffee futures broker said, "The rush of concern has been taken out of the market.
"It (shrinking of premium) is an indication that more vulnerable people in the market have got out." Benchmark May robusta coffee on Liffe ended $7 lower at $1,987 a tonne. Speculators switched to a net long position on robusta coffee futures and options on Liffe in the week to February 14 and moved to a net short on cocoa, exchange data showed on Monday.
Cocoa edged up as the market regained some ground after Friday's steep setback but volumes were light with participation curtailed by a US holiday. London May cocoa reversed earlier losses to finish 12 pounds higher at 1,514 pounds per tonne. Dealers said an improving outlook for the mid crop in top grower Ivory Coast helped to cap gains.
"Early indications about the mid crop are turning positive, many pod counters continue to suggest a potentially good harvest and now negative weather conditions are moderating," Rabobank said in a market update on Monday. Rains picked up in Ivory Coast's main cocoa growing regions last week, lifting hopes for healthier production volumes during the April-to-September midcrop, farmers and analysts said on Monday.
London May white sugar futures rose $8.10 or 1.3 percent to $634.60 with the focus on the extent of any global surplus in 2011/12. "There is a general market consensus on a surplus for 2011/12, but given the inconsistency of production in the past three seasons and concerns about short-term supply, a risk premium remains in the futures price," Rabobank said.
"As the bulk of the expected surplus has not yet reached the international market, inclement weather may still reduce output or bottlenecks in shipping may cause shortages," the report said. The International Sugar Organisation on Monday increased its forecast for a projected global sugar surplus in 2011/12 to 5.17 million tonnes, up from a forecast of 4.46 million issued in its previous quarterly update.