London cocoa hits highest in sterling since 1977 as currency falls

(Reuters) – London cocoa futures rallied on Wednesday to the highest level in sterling since 1977 as the

British currency fell to a new 31-year low on growing fears about the broader impact of the country’s vote last month to leave the European Union.

Sugar and coffee futures eased, pressured by economic concerns following the British referendum.

Dealers said the jump in London cocoa futures was a direct result of sterling’s slide.

“It’s a currency issue,” said a European analyst, who declined to be identified.

Weaker sterling means London cocoa positions are less expensive for holders of other currencies.

Britain’s pound slumped to a new 31-year low on Wednesday, dipping below $1.28 at one point in Asian trading, as investors shunned the currency.

“I wouldn’t say anything has got more or less bullish since the Brexit vote,” the analyst added, referring to cocoa’s fundamentals.

Market sources expect a global cocoa deficit in the 2015/16 season.

London second-month cocoa rose 1.5 percent to 2,487 pounds a tonne, the highest level since 1977, and then lost a little ground to trade at 2,466 pounds, up 15 pounds or 0.6 percent at 1045 GMT.

New York September cocoa was down $5 or 0.2 percent to $3,060 a tonne.

Sugar and coffee futures eased, also pressured by economic worries linked to the British vote.

“I think it’s just macro weakness — nothing fundamental,” said a sugar analyst, who asked not to be identified due to his company’s media policy.

“I wouldn’t be surprised if the market picked itself up by the end of the day. The volatility is inevitable at these high prices.”

The most-active sugar contract last week hit a more than 3-1/2-year high of 21.22 cents a lb on expectations of a shift to a global supply deficit after years of surpluses.

ICE October raw sugar was down 0.22 cents or 1.1 percent at 20.65 cents a lb.

August white sugar was down $4.70 or 0.8 percent at

$567.00 per tonne, with traders turning their attention to expiry of the August contract on July 15.

ICE September robusta coffee was down $5, or 0.3 percent, at $1,754 per tonne, having touched a one-year high of $1,773 on Tuesday, supported by a very poor harvest in Brazil.

ICE September arabica coffee was down 1.9 cent, or 1.3 percent, at $1.4