Cocoa futures on ICE rose more than 5.5 percent on Thursday in a largely technical rally while arabica coffee slid to a 16-month low after an initial advance sputtered. Raw and white sugar were near unchanged. Analysts said after US cocoa futures had held a key support level at $2,260 per tonne on Wednesday, short-covering in oversold conditions ran the market into automatic buy-order stops.
"There's no (fundamental) scare," said Nick Gentile, chief trader at commodity fund Atlantic Capital Advisors in New Jersey. "It's a technical move." New York's May cocoa futures jumped $118 or 5.18 percent to settle at $2,395 a tonne, having hit a session high at $2,404.
London's May cocoa contract added 65 pounds or 4.4 percent to close at 1,540 pounds a tonne. Dealers said crop concerns in West Africa and Asia provided a supportive backdrop but were not seen as a major factor in the run-up in prices. "There has been some news about maybe lower West African production resulting from bad weather over the past month and also a burst of diseases over the Indonesian crops and that has helped prices," Natixis analyst Lysu Paez Cortez said.
Gentile said market fundamentals were not bullish by any means, and US warehouse cocoa stocks had risen. "Industry is well hedged. There's plenty of product around. There's plenty of (cocoa) butter, there's plenty of cocoa (cake)," he said. Market players digested news that France-based commodities firm Sucden plans rapidly to grow its global cocoa operations to source up to 200,000 tonnes of world cocoa in 2012/13, after officially re-entering the market in July last year.
Arabica coffee futures touched a 16-month low amid investor and producer sales, and the prospect of a large crop in Brazil kept the market on the defensive. Late short-covering nudged the market into positive territory at the close. May arabicas on ICE rose 0.80 cent to end at $1.894 a lb, having posted a 16-month low for the second-position contract at $1.851. Robusta coffee futures on Liffe rose, with May up $57 or almost 3 percent to settle at $2,088 a tonne.
"Arabica prices have suffered from news of record crops in Brazil for the upcoming season despite the fact the Central American and Colombian crops may keep on deteriorating," Natixis analyst Paez Cortez said. Some producers who were thinking of selling above $2 are unloading product to lock in profits at these levels, traders said. Commerzbank, in a market note, saw scope for the market to rebound back above $2 per pound. May raw sugar on ICE was up 0.04 cent to end at 23.96 cents a lb. London May white sugar futures added $3.20 to close at $633.60 per tonne.