Softs - Cocoa steady at higher levels on technicals, supportive outlook

Cocoa was steady at higher levels on technical buying and as the supply outlook for this season remains tight.
September Cocoa was up at 1,077 stg a tonne on the Euronext Liffe against 1,066 stg at the close yesterday. Cocoa has gained 2 pct since the start of the month.


`The industry tried to buy at lower levels and was unable to get as much cover,` said a trader.


Cocoa is underpinned for the next two to three months, mainly because the International Cocoa Organisation (ICCO) forecast, a `yardstick` for market players, predicts a deficit for this season.


The ICCO predicts a deficit of between 125,000 and 150,000 tonnes in the 2006/07 (September to October) season from a global surplus of 192,000 tonnes in 2005/06.


Favourable weather reports for cocoa crops in Ivory Coast, the world's top producer, failed to impede the mini-rally. While rain in the second half of June helped crops, more moisture was needed to help further growth, said meteorologists.


An analyst noted cocoa arrivals from Ivory Coast are lower than last year's levels, confirming `the market is still seeing evidence of an ongoing tight supply condition.`


Elsewhere, Nigerian cocoa exports started to resume following the resolution of a nationwide strike over the weekend.


Meanwhile, Robusta coffee futures in London were flat and around 3 pct lower than the high struck last week because investors thought the rally was overdone as supply tightness looks set to ease.


Robusta, the lower grade bean, is traded in London while Arabica, the higher quality coffee, is traded in New York.


Prices had risen to as high as 1,945 usd last week as strong European consumption outweighed healthy Vietnamese production.


While Vietnamese stocks are tight, the market has absorbed a surge in exports from the country in the past nine months, an analyst said.


Robusta coffee for September delivery was largely flat at 1,890 usd a tonne on the Euronext Liffe against 1,888 usd at the close yesterday.


Meanwhile, white sugar for October delivery was up at 312.30 usd a tonne on the Euronext Liffe exchange, against 313.20 usd at the close yesterday.


Source: fxstreet.com