SOFTS-Arabicas ease, near 13-1/4-yr peak, sugar near high

Trade the News

Thursday September 09, 2010 12:45:14 AM GMT

* Big line-up of sugar vessels still at Brazil ports

* Expectations of large Vietnam crop weigh on robustas

* Favourable W. Africa weather drags cocoa lower

(Adds trade comment, byline, updates prices)

By David Brough and Nigel Hunt

LONDON, Sept 9 (Reuters) - Arabica futures dipped on Thursday but remained near Wednesday's 13-1/4 year high, within sight of the key $2 a lb level, while raw sugar rose to a 6-month top and London cocoa touched a one-year low.

London cocoa was pressured by expectations of large main crops in West Africa, the world's main cocoa growing region.

In arabicas, investors locked in gains from Wednesday's peak.

"You would expect a bit of profit-taking following a new high," said Kona Haque, soft commodities analyst with Macquarie Bank in London.

Commerzbank said in a market note,"In view of the expected 10 percent rise in global coffee production in crop year 2010/11 and a balanced market, the 45 percent leap in prices in the past three months cannot be explained in fundamental terms, but is essentially based on speculation."

It added: "The current shortage of high-quality coffee beans should disappear once the harvest in Colombia begins in October and this should cause prices to fall."

The surge in arabicas has lifted the market to become the best performer on the Reuters-Jefferies CRB index, made up of 19 commodities, up 40.9 percent on the year.

ICE second-month coffee was down 1.8 cent or 0.9 percent at 192.75 cents a lb at 1417 GMT.

Some investors are looking to push arabicas to $2 a lb, dealers said.

"I'm sure $2 is a psychological resistance level. Whether it breaks through there remains to be seen -- it might go to $2.02 a lb at some point," a senior London-based analyst said.

"But I think big crops from Brazil and Colombia will weigh on this market."

A lack of producer selling has helped the market to climb easily, as concern about unusually dry conditions in top grower Brazil have kept many sellers on the sidelines awaiting higher prices, dealers said.

The sustained rally has pushed the arabica premium over robusta over $1.20 per lb, the highest level since 1997.

London's November robusta futures dipped in moderate volumes in early trade, pressured by expectations of a big crop in top producer Vietnam.

Liffe November robusta coffee was down $16 or one percent at $1,619 per tonne.

ICE raw sugar rallied to a fresh six-month high, propped up by expectations the global sugar market is likely to be in equilibrium rather than surplus in 2010/11, tight stocks and a big line-up of vessels at Brazilian ports.

ICE front-month raw sugar futures were up 0.49 cent or 2.3 percent at 21.87 cents a lb, having earlier hit a new 6-month high of 21.88 cents.

London October white sugar was up $7.00 or 1.2 percent at $615.80 per tonne.

A European broker said in a daily market report, "We were asked today what it would take to push the market through the 2010 high of 30 cents a lb and up to 40 cents.

"We answered, 'Continued drought in Brazil leading to a short tail on this harvest and lower cane crush next year -- plus a sub 25 million tonne Indian crop.'"

London cocoa futures eased in routine two-way investor dealings in modest volumes, touching a fresh one-year low, pressured by expectations for good-sized main crops in the main growing regions of West Africa.

"There has been West African producer selling in further months -- May 2011 and December 2011," one London-based cocoa futures dealer said.

ICE second-month cocoa futures were down $42 or 1.5 percent at $2,694 per tonne.

Liffe December cocoa was 28 pounds lower or 1.5 percent at 1,880 pounds a tonne.

* Prices as of 1413 GMT Product Last Change Percent Move End 2009 Ytd Percent ICE sugar 21.82 0.44 +2.06 26.95 -19.04 ICE coffee 192.60 -1.95 -1.00 137.60 39.97 ICE cocoa 2698.00 -38.00 -1.39 3310.00 -18.49 Liffe sugar 615.00 6.20 +1.02 710.20 -13.40 Liffe coffee 1619.00 -16.00 -0.98 1332.00 21.55 Liffe cocoa 1880.00 -27.00 -1.42 2271.00 -17.22 CRB index 274.64 0.37 +0.13 283.38 -3.08 Crude oil 75.59 0.92 +1.23 79.36 -4.75 Euro/dlr 1.27 0.00 +0.06 1.43 -11.10 * ICE sugar and ICE coffee in cents per lb, ICE cocoa, Liffe sugar and Liffe coffee in dollars per tonne. Liffe cocoa in pounds per tonne (Reporting by David Brough; editing by Anthony Barker)

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