Among the soft commodities, cocoa recorded fresh two-year highs as supply concerns resurfaced. Robusta coffee extended last week’s gains but sugar and cotton were lower. U.S. crude oil futures surged amid a decline in the country’s oil stocks while Brent crude rose above $112 a barrel for the first time since September.
Cocoa futures prices hit fresh two-year highs as the International Cocoa Organization (ICCO) raised its estimate of the global supply deficit for the cocoa year recently ended. The upward revision took ICCO’s global supply deficit estimate for 20122013 (Oct. 1-Sept. 30) to 160,000 tonnes. The bigger deficit figure has reinforced concerns about a further shortfall in 2013-2014 following earlier adverse weather in the top-producing West Africa region.
Cocoa for March delivery on New York’s ICE Futures U.S. exchange hit $2,844 a tonne on Dec. 3 following the release of the ICCO report, the highest for a second-position contract since September 2011. The contract settled up $25 on the day at $2,813. In London, March cocoa closed £14 higher at £1,759 a tonne on NYSE Liffe on the ICCO data and close to last month’s two-year-plus high of £1,788.
In its latest quarterly bulletin of cocoa statistics, released Dec. 3, ICCO cut its forecast for world cocoa output in 20122013 by 55,000 tonnes to 3.93 million tonnes. Meanwhile, the organisation raised its estimate of global cocoa grindings, a measure of demand, by 54,000 tonnes to 4.05 million tonnes, which it said was “a reflection of robust processing activities in North America, Western Europe and Asia” in the third quarter.
Underlining market worries about another supply deficit in the current cocoa year, ICCO said, “there is growing concern for the return of another supply deficit, with dry weather in West Africa negatively affecting the end of the main-crop production in the region.”
Production in Côte d’Ivoire, the world’s biggest cocoa producer, fell 3 percent to 1.45 million tonnes in 2012-2013, while the outlook for the country’s next crop “is rather subdued,” as trees are ageing and the level of investment is relatively low, ICCO said. The organisation also noted, “wet weather patterns are being seen as crop-damaging” in Indonesia, which is the third-biggest cocoa producer.
By midweek, however, cocoa futures prices in London and New York eased back from the peaks seen earlier in the week amid higher-than-anticipated volumes of cocoa beans arriving at Côte d’Ivoirean ports since the start of the new cocoa year. March cocoa in New York closed at $2,750 a tonne on Dec. 5, while Liffe cocoa for delivery in the same month settled at £1,733 a tonne.
Robusta coffee futures added further gains early this week amid slow shipments from top grower Vietnam and low NYSE Liffe inventories of the beans. Robusta for January delivery hit $1,779 a tonne during trading on Dec. 4, the highest for that contract since Sept.4, before settling at $1,697. January robusta closed $11 a tonne lower the following day at $1,686 a tonne.
Until the recent fillip in the market, robusta had been trading at three-year lows, weighed down by more than ample global supplies and a forthcoming record Vietnamese crop.
Robusta futures started to climb In November following harvesting delays amid heavy rains that had accompanied Typhoon Haiyan which made landfall in Vietnam as a tropical storm and subsequent floods. A proposed plan by the country’s exporters to hold back beans until prices improve further fuelled the rise in futures prices. Robusta bean stocks in NYSE Liffe warehouses are reported to have fallen 57 percent this year and as of Nov. 25, were at their lowest since the early 2000s.
At the end of November, Vietnam’s Ministry of Agriculture and Rural Development estimated November’s coffee export volume at 94,000 tonnes, although a number of other sources this week have indicated a lower export estimate of 80,000 tonnes. This compares to an estimated 122,000 tonnes in the same month a year earlier, according to the country’s statistics office. A Reuters report, quoting traders in the country, said Vietnam’s December exports are expected to increase to 100,000-150,000 tonnes as the harvest picks up pace.
Arabica coffee futures, meanwhile, were lower on continued global oversupply of the beans. The March contract on ICE futures exchange in New York shed 2.46 cents a pound on Dec. 5 to close at $1.060.
Raw sugar prices extended their fall this week to touch a three-month low before turning marginally higher. Prices of the sweetener continue to be pressured by record global stockpiles and subdued demand. Raw sugar for delivery in March hit 16.55 cents a pound on ICE Futures U.S. on Dec. 5, the lowest for a most-active contract since early September, before settling at 16.76 cents. It had finished last week at 17.15 cents a pound.
Refined, or white, sugar was also lower with the March contract on NYSE Liffe touching $446.20 a tonne on Dec. 5, the lowest for a most-active contract since June 2010, before closing at $449.85. Liffe March sugar had finished last week at $464 a tonne.
Cotton futures prices fell as concerns eased about harvest delays in some of the Southeastern U.S. cotton-growing states. The main cotton-growing areas in North and South Carolina, central Georgia, and inland Alabama got less rain than expected, limiting the potential for impacting crop quality. At midweek, the most-active March cotton contract settled at 78.85 cents a pound on Dec. 5 on ICE Futures U.S. March cotton had touched a one-month high of 79.65 cents on Nov. 26 amid the U.S. cotton crop worries and had finished last week at 79.35 cents.
Brent crude rose above $112 a barrel this week for the first time since September while U.S. light, sweet crude touched a one-month high. The Organization of Petroleum Exporting Countries (OPEC) agreed on Dec. 4 to keep its production target unchanged at 30 million barrels a day for the first half of 2014, helping to ease oversupply concerns. The 12-country member OPEC supplies about 40 percent of the world’s oil. A strong set of manufacturing data from China and the U.S also supported oil prices.
Brent crude for January touched $112.34 a barrel during trading on London’s ICE Futures Europe exchange on Dec. 2 before settling at $111.45, up $1.76 on the day. January Brent re-tapped $112 a barrel on Dec. 5, hitting $112.23, before finishing at $110.98 a barrel.
U.S. crude oil was supported by the latest data from the Energy Information Administration, which on Dec. 4 showed the country’s crude stocks dropped for the first time in 11 weeks. Figures from the EIA’s weekly oil report showed U.S. commercial crude inventories fell by 5.6 million barrels to 385.8 million barrels in the week ending Nov. 29. U.S. crude production is running at more than 8 million barrels a day compared with 6.8 million barrels a year ago.
U.S. oil was also boosted by news that a key pipeline will begin service at the start of 2014, relieving the glut of oil at the Cushing, Okla. oil hub, the delivery point for West Texas Intermediate (WTI) futures traded on the New York Mercantile Exchange (Nymex).
TransCanada Corp. expects to begin delivering oil to Texas on Jan. 3 on the southern portion of its Keystone pipeline, enabling more crude to leave the Cushing delivery hub. The Canadian company disclosed its plan to start service in a Dec. 2 filing with the U.S. Federal Energy Regulatory Commission. TransCanada’s Gulf Coast pipeline can carry 700,000 barrel a day for crude to Port Arthur, Texas, from Cushing.
WTI for January delivery on Nymex soared to near $98 a barrel in trading on Dec. 5, its strongest since late October, before closing at $97.38. This represents a more-than-$6 climb on the six-month low of $91.77 recorded last week.
Gold’s direction was mixed this week, with February gold on the Comex division of Nymex initially moving up to reach $1,247.20 an ounce on Dec. 3 before tumbling the following day to settle $28.40 lower at $1,218.80. Analysts said the first of two updates of U.S. gross domestic product data for the third quarter had come in much stronger than expected, sparking fears that the Federal Reserve would begin tapering its monetary stimulus program soon.
Copper prices on the London Metal Exchange (LME) were also mixed, with the three-month initially rallying to $7,128 a tonne on Dec. 4, its highest since Nov. 25, on short-covering and U.S. dollar weakness. However, copper and other metals slipped the next day as fears of an early start to U.S. Fed tapering resurfaced. Three-month LME copper closed at $7,086 a tonne on Dec. 5 but is still holding about the three-month lows touched in mid-November, when prices hit $6,910 a tonne.
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