Soft futures edge higher, robusta gains for a third day

Soft futures traded higher on Wednesday with sugar and cotton trading slightly up on the day, while coffee and cocoa advanced more than 1.5%.

On the NYSE Liffe in London, robusta coffee for September delivery hit a new daily high at $1 977 a ton at 13:13 GMT, up 1.59% on the day. Days low stood at $1 942. Futures settled more than 2% higher yesterday, extending this weeks gains to more than 5.1% after gaining more than 6.4% during the preceding two.

Robusta kept on advancing on Wednesday, marking a third straight day of gains as farmers in Vietnam continued to hold back supplies amid rising local prices, which were the highest since May 28 on Monday. Vietnamese shipments plunged by 37% on the year to 88 397 tons in June. Meanwhile, deliveries from Indonesia, the third biggest producer, slid 28% compared to last year as wet weather delayed bean-drying.

Nedcoffee BV, an Amsterdam-based trader, said farmers in southern Sumatra, Indonesias main growing region, harvested 137 350 tons of coffee this season so far, down from last years 140 450 tons.

Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a report yesterday: “The difficulty moving production in Indonesia is compounding the problem caused by slow Vietnamese movements.”

Meanwhile on the ICE Futures U.S. Exchange, arabica coffee for September delivery traded at $1.2825 per pound at 13:14 GMT, up 2.42% on the day. Prices ranged between days high and low of $1.2833, a one-month high and low at $1.2528 per pound. The C contract gained throughout the last three days, extending this weeks advance to more than 7.7% so far.

Arabica prices were supported recently as investors continued to monitor fluctuations in the Brazilian real. The country is the biggest coffee producer and exporter and movements of the currency influences exports. A weaker local currency gives domestic production competitive advantages on the global market, as it is cheaper for foreign currency holders.

Meanwhile, weather in Brazils growing regions will get colder next week, according to a Somar Meteorologia report yesterday. However, analysts dont expect crops to freeze.

Sterling Smith, a futures specialist at Citigroup Inc., said in a report yesterday: “While it is going to be colder in Brazil July 23 to July 25, we are not of the opinion that it will go below freezing, and the area affected is rather small.”

Cocoa gains as well

Meanwhile, cocoa also marked a strong daily gain, advancing more than 1.8% on the day. On the ICE Futures U.S. Exchange, cocoa September futures traded at $2 326.00 a ton at 13:16 GMT, up 1.95% on the day. Prices ranged between days high and low of $2 323 and $2 277.50 a ton respectively. Cocoa has gained more than 3.5% so far this week after advancing 3.4% during the previous two.

Cocoa prices kept on climbing as the main-crop in Ivory Coast and Ghana will probably be delayed due to dry weather and a large mid-crop, the first annual one. Eric Sivry, head of agriculture options brokerage at Marex Spectron, said in a report yesterday: “One aspect is relatively clear now to happen. We should see a delayed start of the next harvest.”

Meanwhile, according to the Singapore-based Cocoa Association of Asia, cocoa processing in Asia, an indication for demand, rose by 2% in the second quarter to 153 792 tons, compared to a year earlier. Grindings in the first quarter were revised upwards to 153 932 tons in order to include new members of the organization.

Sugar gains as well

Elsewhere on the market, sugar gained as well, marking a 0.44% daily gain by 12:53 GMT. Sugar futures for October delivery stood at $0.1605, ranging between daily high and low of $0.1606 and $0.1598 per pound respectively. The sweetener retreated around 1% yesterday and hit a three-year low at $0.1593 per pound, marking a slight weekly decline of around 0.05% so far after tumbling almost 5% during the preceding two.

Sugar advanced today amid expectations that refineries in Indonesia, the worlds second biggest importer, may purchase 16% more raw sugar this year in order to meet rising domestic consumption. Faiz Achmad, food industry director at the Industry Ministry, said demand may jump to 3 million tons, up from 2.58 million last year. Consumption in Indonesia has jumped by 51% in the past 10 years to 5.1 million tons.

Bachrul Chairi, director general of foreign trade at the Trade Ministry, said today: “Economic growth has led to an increase in demand. Consumption for food and beverages is rising, therefore we need more imports.”

Sugar has fallen 18% so far this year amid a record crop forecast in Thailand, the second biggest-exporter. According to a Bloomberg survey, the sugar crop in India, the second-largest producer, will top demand this year following the best start to the monsoon in more than ten years.

Also, Brazilian industry group Dtargo said earlier in July that the countrys center-south region will probably produce 35.3 million tons of sugar this season, above last seasons 34.1 million.

Cotton gains as well

Meanwhile on the ICE, cotton also gained, trading at $0.8453 per pound at 13:09 GMT, up 0.18% on the day. Prices ranged between days high and low of $0.8465 and $0.8403 a pound respectively. The December contract settled 0.6% lower yesterday, extending this weeks decline to more than 0.5%.

In its weekly crop progress report on Monday, the USDA said cotton squaring fell behind last year’s pace despite a significant advance from the preceding week. As of July 14, 69% of the crop was squared, up from the previous week’s 51%. This however underperformed last year’s 80% during the comparable week and the five-year average of 75%.

As for the cotton condition, crop quality has worsened during the reported week compared to the previous one and is worse than last year. As of July 14, 26% of the crop was rated very poor-poor, compared to 24% a week earlier and 18% last year. Meanwhile, 32% was categorized as “Fair”, the same like the previous week, but below 2012′s 37%. As for the premium quality, 42% was rated good-excellent as of July 14, below the preceding week’s 44% and last year’s 45%.