Arabica coffee futures steadied on Tuesday,digesting the previous session’s sharp gains after speculators covered short positions,while raw sugar and ICE cocoa futures nudged higher.
Arabica coffee futures consolidated gains after Monday’s short-covering rally pushed prices up almost 7 percent,as dealers noted harvest pressure from top producer Brazil was easing at the tail end of the crop.
Prices were too low for quite some time. We saw it as short-term harvest pressure,said Michaela Kuhl,analyst at Commerzbank.
Brazil,the world’s top coffee producer,has a biennial crop cycle and 2012 is a year of higher production.
With it being an on-year in Brazil there should be a surplus of arabicas,but next season we expect a deficit in the global coffee market,we shouldn’t forget that,said Kuhl.
ICE December arabica coffee futures were up 2.1 cent or 1.2 percent at $1.7565 per lb at 1030 GMT. The market has rebounded to a one-month high since the contract dipped to $1.5655 on Thursday,the lowest price for the second month since June 25. November robusta coffee futures were up $24 or 1.2 percent at $2,083 a tonne. ICE October raw sugar futures were up 0.01 cent or 0.1 percent at 19.44 cents per lb,having bounced off Thursday’s two-year low of 18.81 cents.
Morgan Stanley forecasts 2012/13 raw sugar prices at 19 cents per lb,as drier weather in Brazil along with India’s improving monsoon,boosted global supply prospects.
The bank pegged Indian 2012/13 supply at 24 million tonnes,above demand of 22.5 million tonnes,leaving a modest production surplus for export.
For a third year in a row,India is likely to produce more sugar than it can consume domestically in the marketing year starting from Oct. 1,although the exportable surplus will be small,Food Minister K. V. Thomas said on Tuesday.
Raw sugar futures prices are vulnerable to further short-covering after CFTC data showed speculators held their biggest net short position in nearly five years,dealers said.
October white sugar on Liffe rose $1.30 or 0.2 percent to $559.70 per tonne. Cocoa futures on ICE edged higher as dealers said price risk was to the upside due to uncertainty over supply from mixed weather conditions in West Africa and concerns
over top producer Ivory Coast’s sector reform.
ICE December cocoa was up $3 or 0.1 percent at $2,656 per tonne,near last week’s 10-month high for the second month of $2,707.
We’re still awaiting some clarity on issues with Ivory Coast’s new regime,said a London-based trader,noting it was likely the fixed price for farmers for the 2012/13 season would be lower than they hoped.
Farmers could revolt. Traders are very nervous about selling any cocoa for November shipment.
The cocoa sector reforms include setting a fixed price for farmers for the new season starting October 1 and there’s fears farmers could hold back on sales if they are unhappy with the price.
Benchmark London December cocoa was up 2 pounds at 1,711 pounds per tonne.