arabica coffee soars to 8-1/2-mth high on Brazil drought
Chris Prentice and Sarah McFarlane
York| Mon Feb 3, 2014 3:33pm EST
ICE coffee's trade volume spikes as speculators race
Dry weather forecast for February after record dry January
Rally shoots coffee into technically overbought territory
(Adds coffee, sugar closing prices; adds market comment
in paragraphs 13, 14)
YORK/LONDON, Feb 3 (Reuters) - ICE arabica coffee futures
shot to an 8-1/2-month high on Monday and saw their
biggest daily gain in over eight years as a heatwave
in Brazil sparked fears of crop damage and lower output
in the world's top grower, triggering short-covering.
dry weather also lifted raw sugar prices on ICE Futures
U.S., and cocoa futures gained.
raced to cover short positions and establish new long
ones, as weather forecasters warned the country will
not get much-needed rain for another two weeks. January
was Brazil's hottest on record.
could be a game-changer," said Sterling Smith,
a futures specialist at Citigroup in Chicago.
forecasts of 60-million bags are looking at least a
little high," he said, pointing to trade expectations
of another year of huge production.
arabica coffee on ICE closed up 10.75 cents, or 8.6
percent, at $1.3595 per lb and hit $1.3640, the highest
level for the front month since May 2013.
was the spot contract's best daily performance since
September 2005. Volumes were extremely heavy at 74,953
lots and more than triple the 250-day average of 22,181
lots, preliminary Thomson Reuters data showed.
strength further fueled the rally. The March contract
climbed and closed above its 200-day moving average
of $1.2374 on Friday.
sharply outperformed the other 18 components of the
bellwether Thomson Reuters/Core Commodity CRB index
as it posted a five-day day rally of nearly 20 percent,
its steepest since July 2000.
so, with an 14-day Relative Strength Index reading of
77.9, it may be considered overbought and vulnerable
to some profit-taking.
forecasters cautioned it may be too soon to determine
the impact of the dry weather on Brazil's main coffee
growing region, which analysts have expected to produce
another bumper crop.
coffee has soared 35 percent after falling to $1.0095
in November, its lowest in seven years, amid expectations
of bumper global output.
been a slow shift in the fundamentals and now there's
a sexy story of Brazilian drought," said Shawn
Hackett, president of Hackett Financial Advisors in
speculators have been dying to play a weather market
in coffee. It looks like now they're getting their chance."
buying spilled over to the London robusta market, with
the second-month Liffe contract closing up $60, or 3.4
percent, at $1,839 a tonne and touched $1,856, the highest
so, the premium of arabica futures over robusta KC-LRC1=R
spiked to 49.01 cents a lb, up 6.46 cents from the previous
session as it touched its highest since May 2013.
also found support from the dry weather concerns in
the world's top producer and exporter of the sweetener.
front-month ICE raw sugar contract rose 0.19 cent, or
1.2 percent, to settle at 15.74 cents a lb, climbing
further from last week's 3-1/2-year-low of 14.70 cents.
dry weather has not affected Brazil's sugar-producing
hub as harshly as the coffee regions and has arrived
between harvest cycles, a large net short position held
by speculators is ripe for a short-covering rally.
slightly bullish news is capable of 'spooking' those
who have shorted recently and have come late to the
party," Nick Penney, a senior trader at Sucden
Financial Sugar, said in a market report.
white sugar futures on Liffe gained $2.70, or 0.6 percent,
to finish at $426.70 per tonne.
cocoa, March futures on ICE edged up $3, or 0.1 percent,
to finish at $2,914 a tonne, supported by signs of slowing
supplies from the world's top producer, Ivory Coast.
cocoa on Liffe settled up 21 pounds, 1.1 percent, at
1,852 pounds a tonne.
latest weekly port arrivals in Ivory Coat were running
below year-earlier levels although the cumulative total
remained well above last season.
estimated around 30,000 tonnes of beans were delivered
to Ivory Coast's two ports of Abidjan and San Pedro
between Jan. 27 and Feb. 2. (Additional reporting by
Nigel Hunt in London; editing by William Hardy, Peter
Galloway and Marguerita Choy)