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AFKI Commodities Report: Robusta Extends Gains; Sugar, Cocoa Drop

AFKI Commodities Report: Robusta Extends Gains; Sugar, Cocoa Drop

Robusta coffee extended is revival this week amid slow shipments from Vietnam, while cocoa futures eased back from the two-year or more highs reached last week. ICE raw sugar and arabica continued to be pressured by ample global supplies.

Amid signs that supplies from Vietnam, the world’s largest producer of robusta coffee beans, are tightening as farmers there withhold sales, robusta gained further support on reports that the country could stockpile about 20 percent of the beans from this year’s harvest until prices improve.

According to VietNamNet, Vietnam’s Ministry of Agriculture and Rural Development has asked the government to consider preferential loans at low interest rates in order that the country’s coffee exporters can put 300,000 tonnes of robusta beans into storage. The beans only would be exported when prices improve. Until the recent rise, robusta futures prices were trailing at three-and-a-half year lows.

Robusta coffee for January delivery finished at $1,615 a tonne on London’s NYSE Liffe on Nov. 27, up from last week’s close and more than 12 percent above the three-and-a-half year low of $1,431 reached by the January contract on Nov. 7

Robusta futures prices started to rise last week after reports of delays to Vietnam‘s harvest and worries about crop damage following heavy rains and subsequent floods south of the country’s central region. The heavy rains accompanied Typhoon Haiyan which made landfall in the northeast of the country as a tropical storm.

The VietNamNet report quoted the chairman of the Vietnam Coffee and Cocoa Association (Vicofa), Luong Van Tu, who said the country’s robusta harvest, instead of peaking in mid-November as is typical, will likely only get into full swing in December. Tu also said floods had caused “severe” damage to coffee trees in the south of Vietnam’s central region.

Vietnam had been expected to produce a record crop in 2013-14 (Oct.1-Sept. 30), with forecasts varying from between 26 million up to as high as 30 million 60-kg bags of coffee; the majority of these estimates were between 26 and 28 million bags.

Low stocks of robusta beans in NYSE Liffe-certified warehouses are also providing some support for robusta futures prices.

Arabica coffee futures continued to hold above the multi-year lows recorded on New York’s ICE Futures U.S. exchange earlier this month, with the March contract on ICE settling at $1.083 a pound at midweek.

ICE Futures U.S. soft agricultural commodity futures and options markets are closed Nov. 27 for the the country’s Thanksgiving holiday. They will re-open at their regular times on Nov. 28, but will close early at 1 pm EST.

Cotton futures rose to a one-month high early this week amid concern that heavy rain will hamper the harvest in the southeastern U.S. Cotton for delivery in March on ICE Futures U.S. in New York settled at 79.14 cents a pound on Nov. 26, after touching 79.65 cents, the highest for a most active contract since Oct. 25.

Ample supplies and weak physical demand continued to put pressure on raw sugar prices, with the March futures contract on ICE Futures U.S. dipping to its lowest point in almost three months on Nov. 27. March raw sugar finished the day at 17.22 cents a pound.

Late last week, raw sugar in New York had fallen to 17.38 cents after the U.S. Department of Agriculture’s (USDA) revised upwards its forecast of ending stocks  by 5.2 million tonnes from its May estimate for the marketing year 2013/14. Global sugar inventories are now expected to increase 0.5 percent to a record 43.4 million tonnes by the end of 2013/14 compared with a year earlier, USDA said in its ‘Sugar: World trade and markets’ report’.  World sugar stockpiles are rising as consumption of the sweetener lags production for the fourth straight year in a row.

However, with abundant supplies continuing to weigh on the market, the USDA expects low prices to stimulate global consumption and trade in the sweetener.

Refined, or white, sugar for March delivery on London’s NYSE Liffe also slipped, settling at $460.40 a tonne on Nov. 27. March refined sugar had finished last week at $464.10 a tonne.

After recording more than two-year highs last week amid renewed concerns about supplies from top producing region West Africa and particularly Côte D’Ivoire, the biggest producer, cocoa futures eased back this week on improving weather conditions in the region.

March cocoa on London’s NYSE Liffe finished at £1,736 a tonne on Nov. 27, some 2.9 percent off the two-year high of £1,788 recorded by the contract on Nov. 21. Meanwhile, in New York, March cocoa finished $2,772.50 a tonne on ICE Futures U.S. on Nov. 26. ICE March cocoa had reached a 26-month peak of $2,820 on Nov. 20, the highest level for the second month since September 2011.

In contrast to the ample global supplies that are weighing on some of the other soft commodities like sugar and coffee, the International Cocoa Organization (ICCO) is forecasting global demand for cocoa beans to outpace world supplies by as much as 70,000 tonnes during the current cocoa year that started on Oct. 1. The organisation attributes the expected shortfall to increasing demand and a poor harvest in West Africa. ICCO recently revised upwards its 2012/13 cocoa deficit to 86,000 tonnes from its earlier estimate of 52,000 tonnes.

Brent oil holds above $111 on supply worries

Brent crude for January delivery on ICE Futures Europe rose to touch $111.40 a barrel at the end of last week, a level not seen since early October, amid the lack of progress on talks between Iran and major powers on the Middle Eastern country’s controversial nuclear program. Following news of a US-led deal with Iran, Brent fell back to near $108 a barrel during trading on Nov. 25 but quickly recovered to settle at $111, and only five cents down on the day.

The agreement fuelled concerns that an easing of sanctions on Iran’s crude sales will follow. But after investors digested the news, they concluded that it would lead to no immediate increase in crude supplies, analysts said.

Brent crude futures also continue to be supported by a supply disruption in Libya and supply concerns elsewhere, including Iraq and Nigeria. By midweek, January Brent settled at $111.78 a barrel.

U.S. light, sweet crude prices, however, continue to be pressured rising U.S. inventories. On the New York Mercantile Exchange (Nymex), West Texas Intermediate (WTI) for delivery in January touched a low of $91.77 a barrel on Nov. 27, its weakest level since June 3, and down over $3 on where it had finished last week at $94.84.

The latest plunge followed a larger-than-expected rise in U.S. crude stocks. The Energy Information Administration (EIA) on Nov. 27 reported a 3 million barrel rise in the country’s commercial crude inventories for the week ending Nov. 22. U.S. commercial crude stocks as at Nov. 22 stood at 391.4 million barrels, according to the EIA data.  Industry body, The American Petroleum Institute, the previous day had reported a 6.9 million barrel increase in U.S. crude oil stocks, based on its own survey.

Meanwhile, gold futures at midweek settled at their lowest level in five months, amid U.S. dollar strength, and various positive U.S. data which reinforced speculation for an earlier-than-expected announcement from the Federal Reserve to begin tapering of its monetary stimulus package.

Gold for February delivery shed $3.60 an ounce to finish at $1,237.90 an ounce on the Comex division of Nymex, the weakest level for a most-active contract since July 8.

The deal over Iran’s nuclear programme helped boost copper at the start of this week, offsetting a stronger U.S. dollar and worries about rising global supplies of the red metal. Benchmark three-month copper on the London Metal Exchange (LME) touched its highest level in almost two weeks on Nov. 25, hitting $7,140 a tonne, before finishing the day at $7,099. By close at midweek, LME three-month copper stood at $7,070 a tonne. It had finished last week at $7,095.

While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.