SOFTS-Arabica futures fall on arbitrage selling, cocoa eases
* Coffee outlook may hinge on Colombia harvest
* Sugar underpinned by lower production outlook in Brazil
* Ivory Coast cocoa sector reform underpins market (Adds sugar, arabica closing prices)
By Marcy Nicholson and Nigel Hunt
NEW YORK/LONDON, Sept 20 (Reuters) - Arabica coffee futures on ICE dropped on Thursday for the second straight day, pressured by arbitrage selling and rising certified stocks, while traders monitored the early part of Colombia's harvest.
Cocoa futures also fell with a stronger dollar pressuring prices, while raw sugar posted modest gains as some Brazilian mills were said to be shut down due to rains with prices still near a two-year low.
December arabica futures on ICE fell by 5.80 cents, or 3.3 percent, to close at $1.6860 per lb, its biggest one-day drop since July 24.
Dealers said market participants appeared to be buying London robusta futures and selling New York arabica futures, causing the ICE Futures U.S. coffee market to drop. The arabica premium fell to around 78 cents per lb, from roughly 83 cents on Wednesday.
"You have the falling demand in arabica which is a function of more demand for robusta. Arabica is going to the board and stocks are building up," said one U.S. dealer.
Certified arabica stocks have been climbing steadily for months, reaching nearly 2.1 million bags this week so far, the highest in more than two years.
"For arabica, the big thing now will be Colombia's output," said Romain Lathiere, head of dealing at Diapason Commodities Management, adding the huge crop in Brazil had already been priced in during the sharp decline in prices earlier this year.
Colombia's main coffee harvest is expected to be above last season but below the average of the last decade. Initial pickings were scheduled to start this week.
Colombia is the world's biggest producer of high-quality washed arabica.
Robusta coffee futures on Liffe were higher, underpinned by a slowdown in exports and thinning stocks in Vietnam although fresh supplies should be available late next month when harvest gets underway in the world's top robusta producer.
Vietnam's actual August coffee exports fell 10 percent from July to 103,000 tonnes, or 1.72 million bags, Vietnam Customs data showed, down from a previous government estimate of 120,000 tonnes.
November robusta coffee futures rose $24, or 1.2 percent, to settle at $2,041 a tonne.
Cocoa futures were lower, with the U.S. market feeling more pressure from the weak sterling to the dollar. But the market was still underpinned by the possibility that the cocoa sector reform in top grower Ivory Coast could lead to some disruption in the flow of supplies from during the early part of the main crop season that begins on Oct. 1.
A sweeping reform of Ivory Coast's cocoa sector, meant to improve farmer incomes, will fail if the marketing board refuses to increase allowances for the costs of collection from farms and transportation to ports, exporters told the body.
December cocoa on ICE fell $19, or 0.8 percent, to close at $2,519 a tonne, while December cocoa on Liffe eased 7 pounds, or 0.4 percent, to end at 1,635 pounds a tonne.
"With global demand continuing to outpace production, and with new grinding capacity in Southeast Asia starting to compete with grinders in Europe and the USA, cocoa price strength and volatility is likely to continue for the remainder of the year," Ecobank said in a report on Thursday.
Raw sugar futures on ICE were higher with downward revisions to Brazil's output helping to halt the market's recent downward slide, which has seen prices at the lowest level in two years.
Brazil's sugar industry association Unica expects the main center-south cane crop to yield 32.7 million tonnes of the sweetener in 2012/13, down 1.2 percent from 33.1 million tonnes forecast in April. Consultancy Datagro on Wednesday had issued an even lower forecast of 31.34 million tonnes.
Dealers noted that a global sugar surplus is still widely expected with Czarnikow projecting it at 7.1 million tonnes, raw value, despite upwardly revising its outlook for consumption.
"There is rain today and that caused some mill stoppages," said Michael McDougall, a senior vice-president at brokerage Newedge USA, referring to top sugar grower Brazil.
"We know of 21 mills that shut down yesterday and today. It's the first stoppage we've had in a month-and-a-half."
ICE October raw sugar futures rose 0.25 cent, or 1.3 percent, to finish at 19.21 cents per lb, an inside day. The market continued to hold above a two-year low of 18.81 cents touched on Sept. 6.
December white sugar on Liffe finished up $5.00, or 0.9 percent, at $557.00 per tonne. (Editing by William Hardy and Marguerita Choy; Editing by David Gregorio)
- Tweet this
- Share this
- Digg this