SOFTS-ICE coffee, cocoa at highest in more than 30 years

by Jane Baird

Cocoa and arabica coffee futures rose to the highest levels in more than three decades on ICE on Tuesday, with cocoa driven by turmoil in top grower Ivory Coast and coffee by tight supplies of high quality beans.

Cocoa futures have been rising as the crisis in Ivory Coast has shut down international banks and has led to a virtual halt in exports.

Ivorian troops killed at least six protesters who were calling on Laurent Gbagbo to step down as leader on Monday, witnesses said, as African presidents charged with resolving the crisis met the incumbent in Abidjan.

"The situation is not getting any better," said Kona Haque, commodity strategist at Macquarie Bank. "I think the risks are rising for short-term supply disruptions."

May cocoa futures on ICE stood $38 or 1.1 percent higher at $3,537 a tonne after rising earlier to a 32-year peak for the second month of $3,574.

Prices on Liffe also advanced with May up 28 pounds or 1.2 percent at 2,314 pounds a tonne.

In a bid to starve Gbagbo's government of funding from the cocoa trade, rival Alassane Ouattara has called on exporters to suspend business during the month of February and has left open the option of a longer embargo, which dealers fear could cause major problems for global cocoa supplies.

"There's a big risk of the ban being extended into the mid-crop," Haque said.

COFFEE, SUGAR

Coffee prices have doubled since June 2010 with supplies tightened by three consecutive below-par harvests in Colombia, the world's top producer of high quality washed arabica beans.

"Physical (coffee) prices are still very strong, and Brazil are in no rush to sell," Haque said. "A good chunk of the farmers are pretty much sold out anyway."

May arabica futures stood 2.00 cents or 0.7 percent higher at $2.75 per lb at 1200 GMT. The contract earlier peaked at $2.78 per lb, the highest level for the second month in more than 30 years.

Coffee prices soared to record levels in 1977 after severe frost cut the 1976/77 Brazilian crop to around 9.3 million bags from an expected 22 million.

Dealers said that buying by roasters was limiting any downward moves.

"Roasters seem to be not as well covered as was thought, given you see buying every time the market dips," Haque said.

Robusta coffee futures on Liffe also rose with May peaking at $2,417 a tonne, the highest level for the second month since March 2008. Prices subsequently slipped back to $2,392 a tonne, still up $5 or 0.2 percent.

Sugar prices were also higher, boosted by the prospect of increased imports into the European Union.

A European Union committee will vote on Thursday on whether to open a new import quota for sugar at reduced duties, to ease a supply shortage on the EU market, the European Commission said on Monday.

"The strength of the markets this morning may be as a result of a vote by an EU committee on Thursday on whether to open a new import quota for sugar at reduced duties to ease a current supply shortage," Sucden Financial said in a market note.

"If approved, there would be increased imports of both whites and raw sugar from the world market," Sucden added.

Continue reading this article >>