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SOFTS-Short-covering buoys arabica coffee, cocoa dips

Published: 05 Nov 2009 17:32:55 PST

* Hurricane Ida and falling stops boost arabica

* Heavy 2009/10 Indian imports to underpin sugar

* Ivorian harvest pressure hits cocoa (Recasts with markets closing levels, adds U.S. comment, and NEW YORK dateline/byline)

NEW YORK/LONDON, Nov 5 - A flood of short-covering pushed arabica coffee futures higher on Thursday, as Hurricane Ida threatened Nicaragua and certified stocks dropped sharply.

Sugar futures fell in a technical sell-off while cocoa dropped on harvest pressure and chart-based weakness after the ICE market continued to ease from a recent 30-year peak.

"The exchange stocks have been dropping so that's also been driving some underlying support (for coffee). The weather news definitely popped it up here," said Boyd Cruel, softs analyst for Vision Financial Markets in Chicago.

ICE December arabica coffee futures closed up 1.35 cents at $1.4210 per lb, while London (Liffe) January robustas inched down $2 to settle at $1,445 per tonne.

Volume in arabica coffee was exceptionally heavy early in the session on short-covering as Hurricane Ida approached Nicaragua and threatened Honduras. Ida was later downgraded to a tropical storm as it moved into Nicaragua and the market pared its gains.

A steep fall in ICE certified arabica stocks also spurred buying in the market, with stocks falling 1.8 percent from the day before.

Arabica coffee found support from a strong interest from index funds, futures dealers said.

Traders also eyed the impact of heavy and persistent rains in top grower Brazil in September and October on the flowering of the next coffee crop.

Sugar futures fell at the opening, later clawed higher, and then turned sharply lower, with the market focused on the impact of the heavy Brazilian rainfall on yields, and on India's substantial import requirements in marketing year 2009/10.

"It's been pretty choppy. There is no new information at this time so sugar is doing a lot of technical action," a dealer for a major U.S. financial house said.

The longer-term technical and fundamental outlook for sugar would indicate higher prices, said Larry Young, an analyst for brokerage Infinity Futures in Chicago.

Dealers and analysts see firm support to sugar futures in the near term, largely due to expectations of strong import requirements by India, the world's top consumer of the sweetener, in 2009/10, possibly around 6-7 million tonnes.

ICE March raw sugar futures closed down 0.83 cent, or 3.5 percent, to 22.76 cents per lb, while London December white sugar finished $6.50 easier at $585.20 per tonne in thin dealings.

Cocoa futures fell on chart-based selling and harvest pressure in top grower Ivory Coast as weekly bean arrivals have been up sharply from year-ago figures.

"Harvest pressure is finally kicking in here. It's way ahead of last year. That whole prediction of a smaller crop could be pushed aside for the time being," Cruel said.

Position rolling out of the December contract into March boosted volume in U.S. cocoa futures, dealers said.

ICE December cocoa futures closed down $54 at $3,218 per tonne, while London March cocoa finished 33 pounds easier at 2,147 pounds per tonne in thin trade.


Source: Reuters

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