Arabica rallies from 7-yr low on technical buying; cocoa sinks

Reuters 07/11/13

NEW YORK/LONDON: Coffee futures jumped almost 4 percent in a turbulent session on Thursday on technical buying and bargain hunting after prices plunged to seven-year lows on concern about bumper crops in top producer Brazil.

Cocoa sank, nearly reversing Tuesday's gains, as an options expiration led to speculative selling, while sugar edged down. Relentless selling pushed arabica prices to $1.0095 per lb, their weakest since October 2006, and near the psychologically key $1 mark.

That sparked a flurry of technical buying that put the front month on track for its strongest one-day performance in two months.

"You're seeing a lot of bears take back, not because of any news but because they went for a buck and it got close. That was enough," said Jack Scoville, vice president for Price Futures Group in Chicago. December arabica coffee futures on ICE rallied almost 4 percent to $1.052 per lb and settled up 2.4 percent at $1.0395 per lb. December options will expire at the end of Friday's session.

Arabica has been falling for more than two years with large crops in Brazil and a rebound in Colombian production driving prices down from a peak of more than $3 per lb in May 2011 to a low on Thursday of barely more than $1.

It has not dropped below $1 since September 2006. Late Wednesday, data showed Colombia, the world's largest producer of washed arabica, will grow its biggest crop in seven years, increasing output by 43 percent.

An options expiration and a storm headed towards top grower Vietnam lent some support to robusta prices, which recovered from 3-1/2-year lows earlier in the session. Vietnamese farmers have harvested on average 20 percent of the new 2013/2014 coffee crop in the Central Highlands, traders said, indicating ample bean supply.

Liffe January robusta coffee settled up $6, or 0.4 percent, at $1,460 a tonne, after hitting a session low of $1,431.

COCOA FALLS

Cocoa plunged in its largest daily fall since Aug. 21 as investors continued to book profits, shrugging off the potential impact from a massive typhoon headed towards the Philippines, a major producer.

ICE March cocoa settled down $50, or 1.9 percent, at $2,693 a tonne, as the Ivory Coast harvest accelerates.

Traders eyed $2,630 as the next support level. "It's long liquidation and profit taking after Tuesday's rally," said Boyd Cruel, analyst at Vision Financial Markets in Chicago.

March cocoa on Liffe settled down 23 pounds, or 0.1 percent, at 1,712 pounds a tonne. ICE March raw sugar futures settled down 0.6 cent, or 0.3 percent, at 18.04 cents a lb, after hitting a six-week low of 17.93 earlier in the session.

Sugar has been in a steady decline since hitting a two-year high on Oct. 17 after a fire ravaged a major sugar terminal in top grower Brazil.

Concerns about nearby tightness have waned due to ready alternative supplies from India and Thailand.

India announced on Thursday it will carry forward stocks of 8.8 million tonnes into the new crop year.

US data showed speculators increased their net long position by 636 contracts to 156,584 in the week ended Oct. 29, which traders said was surprisingly high.

December white sugar on Liffe was off $4.9, or 1.03 percent, at $475.10 a tonne.