(Reuters) – Cocoa futures rose on Wednesday with the market underpinned by tightening supplies following a poor mid-crop in top grower Ivory Coast and the prospect of a slow start to the main crop later this year.
Dealers noted the tightening supply outlook was reflected in the London cocoa market’s structure with nearby contracts trading at substantial premiums to further forward positions.
“The ongoing dry weather and potential slow start to the new crop is reflected in the strong spreads, especially what is going on in July/Sep,” one London dealer said.
The July contract, which expires on Thursday, was indicated at a premium of as much as 87 pounds to September after a steady rise in recent weeks.
Persistent cool weather in some of Ivory Coast’s main cocoa growing regions could hurt output during the start of the forthcoming main crop, farmers said on Monday.
Weather in July and August is crucial to determining the size of the October-to-March cocoa main crop. Farmers said prolonged cloudy and cool weather could prevent cocoa trees from reaching their full potential.
September New York cocoa was up $25 or 0.8 percent at $3,139 a tonne at 1143 GMT as it continued to fill a chart gap created when the market opened sharply lower on June 24.
“We delved into the gap which was created on the day after the (EU) referendum. It is on a mission now to fill that gap,” the London dealer said.
Dealers said second quarter North America grind data on Thursday would also provide a short-term focus. Dealers are estimating a roughly 5 percent rise, which would mark the first year-over-year gain in seven quarters.
September London cocoa rose 16 pounds or 2,484 pounds a tonne.
Raw sugar futures were lower with the market weighed by the fast current pace of cane crushing in top producer Brazil.
“Harvest conditions remain largely favourable in centre-south Brazil cane regions,” analyst Madeleine Donlan of Commonwealth Bank of Australia said in a market note, adding the front month’s discount had been widening.
Brazil sugarcane industry association UNICA is expected to issue an update on cane crushing in the second half of June early next week.
October raw sugar on ICE was off 0.16 cent or 0.8 percent at 19.56 cents a lb after earlier touching 19.37 cents, its weakest level in more than two weeks.
August white sugar, which expires on Friday, was off $6.40 or 1.2 percent at $536.80 per tonne.
Coffee prices were marginally lower with September Arabica off 0.1 percent at $1.4730 per lb and September robusta down 0.3 percent at $1,803 per tonne.
