Arabicas rebound 6 percent on short-covering spree

NEW YORK/LONDON, Arabica coffee futures on ICE jumped 6 percent on Wednesday, snapping back from the prior session’s biggest tumble in nearly five years on heavy short-based buying, while raw sugar fell to the lowest level since 2010 on abundant supplies.

London cocoa futures inched up to a five-month high, rising for the fifth straight session on support from the weak pound against the U.S. dollar, while New York cocoa eased, falling back below its 200-day moving average.

Arabica coffee corrected moving sharply higher on technical short-covering. This came after it sank 6.9 percent to a 13-month low on Tuesday in a dramatic late-day drop that triggered sell-stops while concerns about margin calls caused many who held long positions to liquidate.

May Arabica futures rose 7.80 cents, or 6 percent, to settle at $1.3755 per lb. Though the contract traded in a range of more than 8 cents, it remained within Tuesday’s even wider range when it fell to $1.288, a 13-month low.

“Asian roasters are coming in to take advantage of the lower levels,” one London-based broker said.

May robusta moved in the other direction and closed down $25, or 1.3 percent, at $1,856 a tonne.

The arabica/robusta spread <KC-LRC2=R> narrowed for the thirteenth straight session, falling below 51 cents per lb, the weakest since January 2014.

Raw sugar futures dipped to the lowest level in nearly five years on prospects for a big Brazilian cane crop, a weak real currency, and expectations of Indian exports.

A weak real boosts local currency returns from sales by Brazilian producers of dollar-denominated commodities.

“A good crop is coming in from Brazil, India has announced a raw sugar export subsidy, Thailand has unsold stocks, and crude oil is weak — all this weighs on sugar,” said Claudiu Covrig, senior agricultural analyst with Platts Kingsman.

ICE May raw sugar futures ended down 0.11 cent, or 0.8 percent, at 13.34 cents a lb, after touching the lowest since May 2010 at 13.18 cents.

May white sugar futures close up $2.10, or 0.6 percent, at $369.20 a tonne.

May London cocoa closed up 3 pounds, or 0.1 percent, at 2,041 pounds a tonne, after tapping 2,043 pounds, the highest since Oct. 1.

May New York cocoa fell by $15, or 0.5 percent, to finish at $3,007 a tonne.