ICE arabica coffee prices hit their highest level in nearly two years on Tuesday as funds bought into the market amid signs of supply tightness. Raw sugar hit its highest mark since February, while cocoa prices fell.
March arabica coffee rose 3.3 cents, or 2.6%, to $1.3170 per lb at 1506 GMT, having hit $1.3285 earlier, its highest since early January 2018. Arabica has been underpinned by the prospect of a deficit in 2019/20 and worries that dry conditions in Brazil in October could curb the 2020/21 crop.
A shortage of high-quality coffee in Central America, Colombia and Brazil has sparked a scramble for ICE-certified stocks, which have fallen from 2.5 million bags in March to around 2.1 million. "We see a lot of demand for certified stocks, it adds to concerns the market had about the development of Brazil's 2020/21 crop," said Carlos Mera, senior commodities analyst at Rabobank.
He added, however, that at these price levels, it was mostly speculators driving up prices, meaning gains from here on may not be sustained in the longer term. Kenya's farmers are grubbing up their coffee bushes to plant other crops as previously low prices and rising temperatures drive small growers to the brink of collapse.
March robusta coffee rose $56, or 4%, to $1,457 per tonne, a five-month high. March raw sugar was up 0.02 cents, or 0.2%, at 13.40 cents per lb, steadying after hitting 13.46 cents, the highest since February. Brazil's center-south region produced 337,000 tonnes of sugar in the second half of November, 36% less than a year earlier, as cane crushing fell and mills favored ethanol production over the sweetener.
Sugar has been buoyed by tightening supplies, with a global deficit widely forecast for the current 2019/20 season and some early indications there could be another deficit in the 2020/21 season. Dealers said funds continued to cover their short positions, adding that producer-selling of excess stocks had subsided for now.
"Our thinking is sugar prices are headed into a 13.5-14.0 cent range. Our ambition for prices is modest because we think the sugar market can easily access more sugar at the right price," analysts at Commonwealth Bank of Australia said.
March white sugar rose $0.80, or 0.2%, to $352.40 a tonne, having hit its highest since February at $353.30. March New York cocoa was down $19, or 0.7%, at $2,582 a tonne.
Cocoa arrivals at ports in top grower Ivory Coast reached 787,000 tonnes between Oct. 1 and Dec. 8, exporters estimated, up 0.2% from the same period last season. Ghana's cocoa arrivals reached 257,000 tonnes between Oct. 1 and Nov. 21, exporters estimated, down 1.5% from the previous season. March London cocoa was down 19 pounds, or 1%, at 1,823 pounds a tonne.