ICE sugar and coffee remain higher
November 13, 2012
Raw sugar futures on ICE Futures US climbed for the second straight day on Monday, correcting up from last week’s two-year low, while arabica coffee futures rose above the previous session’s 4-1/2-month low on heavy spreading. Cocoa posted modest increases while both the London and New York markets continued to hug their 200-day moving averages.
March sugar futures rose 0.30 cent, or 1.6 percent, to close at 19.36 cents a lb. The contract slumped to as low as 18.66 cents on Friday, the lowest level for the front month since August 2010, before recovering some ground. “It’s extremely oversold. We’re getting a bounce along with the softs,” said James Cordier, founder and president at Liberty Trading Group in Tampa, Florida.
Some dealers said the rebound on Friday, which some linked to talk that rain has slowed cane crushings in Brazil, created a more constructive chart outlook. A slow-moving cold front has brought heavy moisture to Brazil’s main agricultural areas, likely marking the escalation of spring rains over the soy, corn, sugarcane, coffee and orange crops, local forecaster Somar said.
Speculators more than doubled their net short positions in raw sugar contracts on ICE Futures US in the week to November 6, US Commodity Futures Trading Commission (CFTC) data showed on Friday. December white sugar on Liffe rose $7.20, or 1.4 percent, to settle at $536.70 per tonne.
March arabica coffee futures settled up 3.15 cents, or 2.1 percent, at $1.5305 per lb. The contract sank to a 4-1/2-month low late last week at $1.55 per lb. Position rolling out of the December contract into March boosted volume ahead of the spot contract’s first notice day November 21. The spread narrowed to close at 5.15 cents, a bullish move that was seen helping to lift the futures market, after it hit a wide discount of 5.65 cents per lb on Friday, the highest shown on Thomson Reuters monthly data dating back to 2002.
The spreading lifted total volume above 53,000 lots, the highest in seven months, preliminary Thomson Reuters data and ICE data showed. Effective January 2013, ICE Futures US will increase its coffee grading fee to $1.25 per bag from $1, and raise its licensing fees by $100, subject to CFTC’s approval.
Friday’s CFTC data showed that speculators increased their net short position in arabica coffee to the highest level on record, a factor that could cap potential upside, the broker said. “I think the market will really struggle to rally unless we see some positions start to get forced out,” the broker said. January robusta coffee futures inched up $3 to finish at $1,979 per tonne.
Robusta prices were expected to remain steady despite an anticipated bumper crop in top producer Vietnam, as sellers in the country held back product, waiting for higher prices. “I don’t think the Vietnamese will come to the market in any great size. They are well-financed and well-disciplined, so we don’t see them as a major seller,” the London broker said.
Cocoa futures were also firm. ICE March cocoa closed up $16, or 0.7 percent, to $2,375 per tonne, staying close to its 200-day moving average at $2,360. The contract fell to $2,322 on Friday, the lowest level for the second month since late July. Dealings were heavy as December/March spreading continued ahead of the spot contract’s first notice day on Friday, with total volume exceeding 42,000 lots nearly double the 30-day average but below the November 8 record high at 60,559 lots, preliminary Thomson Reuters data and ICE data. Benchmark Liffe March cocoa futures settled up 7 pounds, or 0.5 percent, at 1,545 pounds per tonne, staying close to its 200-day moving average at 1,535 pounds.