Sugar and robusta coffee futures clawed higher Monday in a short-covering surge sparked by optimism euro zone talks to address the debt crisis may finally gain some traction. But US cocoa beans slid to a 2-1/2-year low as the impact of the harvest in the prime West Africa growing region trumped the buoyant mood of the latest news in the European crisis.
ICE March raw sugar futures rose 0.30 cent to trade at 23.20 cents a lb at 12:09 p.m. EST (1709 GMT). London's March white sugar futures on Liffe added $2.80 to trade at $601 a tonne. New York's March arabica coffee contract lost 1.00 cents to trade at $2.3155 a lb at 12:11 p.m. That was off a session top of up 5.85 cents at $2.384. London's January robusta contract added $53 to trade at $1,981 a tonne.
"Coffee and sugar seem to be getting a benefit ... from the macro strength of outside markets," Country Hedging Inc senior analyst Sterling Smith said. "Prices are firmer ... on slightly more positive macro-economic sentiment over the eurozone debt situation," said Barclays Capital in a commodities note.
World stocks rose on Monday from last week's seven-week low and the cost of insuring euro zone government bonds against default fell broadly as investors grew more hopeful that euro zone leaders would unveil fresh measures to resolve the two-year-old debt crisis.
Smith said the question remained whether the Europeans will again disappoint. "We may have another day or two of firmness," said Smith, adding there are "some doubts about the sustainability" of this rally.
Liffe robusta coffee futures rallied more than 5 percent to a six-week high on fund short covering, triggering selling from the world's top producer Vietnam, said dealers. "It's still early days in Vietnam, the crop's late because of the wet weather they had in October. The market is finding some fundamental reasons to go up; Vietnamese want higher prices and secondly people don't want to buy from Vietnam until they see the coffee," a London-based coffee dealer said.
Raw sugar futures bounced off last week's 5-1/2 month low, with dealers eyeing developments in India where the government is expected to publish the notification, detailing the parameters for the exports, on Tuesday.
Commodity house Czarnikow said in a report published on Monday it expects rising Indian sugar demand could curb future exports from the world's second largest producer which is bullish for the market's longer term price outlook.
"Indian sugar consumption has grown over the past decade at an annual average rate of 3.5 percent. Czarnikow sees good potential for higher rates of consumption growth in the future due to population and economic growth," said Czarnikow analyst Peter de Klerk.
Last week news the Indian government decided to allow 1 million tonnes of white sugar exports sent global sugar prices lower. However, Czarnikow said appetite from mills to take up licences could be weak as domestic prices have been rising while world market futures have been falling.
"We have good crops from the northern hemisphere coming on line and the threat of India, Thailand, Europe and Russia et al make it hard for a sustainable rally to materialise," said Thomas Kujawa from Sucden Financial.
Cocoa futures on the other hand could not make any headway given the bearish weight of the ongoing harvest in Ivory Coast and Ghana, the world's top producers of cocoa beans. Cocoa arrivals at ports in top grower Ivory Coast reached around 342,975 tonnes by Nov 27, exporters estimated on Monday. While that is down about 1.5 percent on last season, dealers have noted that farmers are holding back beans, and production estimates are high this season.
March cocoa on ICE fell $17 to end at $2,364 a tonne, the lowest settlement for the second position contract since May 2009. London's March cocoa futures lost 20 pounds to finish at 1,516 pounds a tonne, having touched a contract low of 1,513 pounds.
"It was a part of the macro picture this morning, the weak dollar lifted it here," one veteran cocoa dealer in the United States said. "We ran into the strong hedge flows here of West African cocoa. The trade looked at that as a selling opportunity."Ivory Coast, Ghana, Nigeria and Cameroon are all getting into the full swing of their cocoa harvest.