Arabica coffee futures on ICE rose on Tuesday, boosted by a softer dollar and increased risk appetite following better-than-expected Chinese economic growth data.
Raw sugar futures on ICE also edged up although more favourable weather in Brazil and the prospect of further exports from India kept a lid on the market. Cocoa was mostly flat.
ICE futures markets had been closed on Monday for a public holiday in the United States.
Dealers said coffee was supported by some short covering by funds, driven partly by more constructive economic news and the weaker dollar.
“I think the funds are short in London, short in New York. You get these little rallies fuelled by these positions but optimism for higher prices is very low at the moment,” one London coffee dealer said.
Speculators extended a net short futures position in NYSE robusta coffee and increased net longs in cocoa and white sugar as of Jan. 10, exchange data showed on Monday.
March arabica coffee futures on ICE rose 2.75 cents or 1.2 percent to $2.28 per lb by 14:35 SA time while March robusta coffee on Liffe climbed $22 to $1,876 a tonne.
Dealers said the market also derived support from continued below-par production in Colombia.
Colombia's coffee output dropped to 7.8 million 60-kg bags in 2011, down 12 percent versus 2010 and the worst year in more than three decades, the growers' federation said on Monday.
Crude oil and many other commodity markets were higher on Tuesday, buoyed by a weaker dollar and slightly better economic news from China and Germany.
Raw sugar futures on ICE also registered modest gains, climbing to the highest level in nearly two weeks.
“There is a general lift in outside markets and the dollar is down. Sugar is caught up in everything else,” James Kirkup, head of sugar brokerage at ABN AMRO Markets (UK) Ltd, said.
March raw sugar futures on ICE rose 0.21 cent or 0.6 percent to 23.98 cents a lb after climbing to a peak of 24.09 cents, the highest level for the front month since Jan. 5.
“The fundamental backdrop is not as supportive as the macro (backdrop),” he added, noting rains in Brazil had improved the crop outlook while there was also the prospect of further exports from India, the world's number two producer.
LIFTING OF CONTROLS
“India looks to be making noises about exports and perhaps the end of the current price regime. Those aspects (developments in India and Brazil) are not bullish,” Kirkup said.
India's food minister will soon discuss with the finance minister lifting controls on sugar, K.V. Thomas said on Tuesday, a day after industry officials lobbied the government to free the sector.
Cocoa futures on ICE were little changed as concerns about the demand outlook after last week's lower-than-expected 1.8 percent rise in the European cocoa grind in the fourth quarter of 2011 weighed on the market.
Demand for chocolate is improving by the month, even in the more difficult markets of southern Europe, the chief executive of chocolate-maker Barry Callebaut said in an interview on Tuesday.
“From a strategic point of view, I think the price will have to go up again because demand will outpace supply but at the moment our experts believe price will move sideways, Barry Callebaut CEO Juergen Steinemann told Reuters.
The market remained underpinned by fears that dry winds in Ivory Coast may curtail production.
Strong harmattan winds and dry weather in most of Ivory Coast's cocoa growing regions, which have hurt development of the main crop, could also harm its mid crop, farmers in the top producing country said on Monday.
March cocoa on ICE eased $4 or 0.2 percent to $2,265 a tonne while May cocoa on Liffe rose 10 pounds or 0.7 percent to 1,504 pounds. - Reuters