Sunday, May 15, 2011

Plantation Overview: Rubber sustains losses, coffee buoyant

by Gautam Koderi
It seemed hard for the soft commodities this week to settle down as jitters continued to characterise the market following the major sell off during the previous week. However, sugar futures managed to pare some losses on Friday because of the news of Brazilian output fall. The recovery in the US dollar, on the other hand, also tried barricaded any advance in the commodities during last week.

Rubber
Rubber prices sustained losses earlier during the latest week following carried forward selling that emerged after the general weakness in commodities. However, the market managed to recover most of its losses as the underlying demand for rubber proved to be strong.

According to the latest data of Rubber Board, the production for the month of April has recorded a 6 percent gain at 56800 tonnes. The data also showed rise in consumption of the commodity to 82,500, up 5 percent. However, the export picture was rather dismal with a 53.16 percent fall in exports towards 1043 tonnes during the month April.

Additionally, the Chinese rate hike of commercial bank reserve requirements put extra pressure on prices because of the idea that consumption from the country will fall due to the policy measure. Mixed fundamentals in the market have rendered prices trading almost flat.

At the time of writing the most active June futures of rubber traded at 23160, down less than 1 percent. The market had made a low of 22900 during the week, but managed to climb above 23000 levels by the end of the week.

Coffee
Coffee futures shied away from its multi-year highs that it had scaled recently as the effects from the commodities sell off still captivated the market. In addition, the coffee production next season from Brazil is expected to rise as farmers are said to be planting more coffee as prices doubled last year.

However, the demand for coffee is expected to remain and buying interest is expected to be seen at dips. International Coffee Organisation has estimated a 12 percent rise towards 48 million bags as against the 43 million bag production expected this season.

However, the US Department of Agriculture has estimated the production of coffee from Brazil for the year starting July 1 2011 will be lower at 49.2 million bags as compared to 54 million bags last year.

The most active July Arabica futures at New York was seen dropping by over 6 percent towards $2.694 per pound New York, which is the biggest slide since June 2009.

Cocoa
Cocoa futures were mostly in ranges and ended slightly lower as compared to the closing price of previous week. The market was reluctant to advance as the recovery in the US dollar rendered the commodity dearer for investors, resulting in it reducing the demand.

In addition, the news of resumption of cocoa exports from Ivory Coast after its political crisis also turned the sentiment weak. Reports also showed that 90 percent of cocoa stuck in the warehouses in the country is found to have retained its quality.

The weaker than expected US jobless claims also might have contributed towards the weaker sentiments in the market, which is more of a temporary factor.

Cocoa futures for the most attractive July contract fell $35 to close the weak in New York at $3002 per tonne. London cocoa ended at 1871 per tonne, down 3 pounds.

Sugar
Sugar futures managed to gain last week as production fell in Brazil. Reports showed that production in Brazil for the months of March and April fell almost 70 percent to 795,000 tonnes as compared to the corresponding time last year.

In addition, the estimates of US department of Agriculture released last week. The figures showed that sugar production in US and Mexico to be down by 5 and 3 percent respectively in 2011/12.

However, the inference from the data released by the International Sugar Organisation (ISO), which predicts supply to surpass demand by 779,000 tonnes for 2010-2011 fiscal, lead by production advances in Thailand.

The ISO said that world production is likely to rise towards 167 million, up 5.7 percent, from last season. While, consumption is expected to rise only by 2.2 percent to 166.2 million tonnes. Sugar prices settled at London Futures at 602.1, up 1.2 percent.

Cotton
Cotton futures fell as the week progressed and even fell towards a four month low in New York following the concerns of slowing demand especially with the Chinese step to increase commercial banks’ reserve requirements.

The recovery in the US dollar and weaker than expected jobless claims pressure cotton futures down further. However, prices of cotton were seen recovering some of its losses as floods in US are expected to reduce exports from the country.

The estimates from the USDA showed supply to fall towards 18 million bales. Data also estimates ending stocks at 2.5 million tonnes, down 43 percent above previous year during 2011/12 fiscal.

Cotton futures settled at $1.4515, up just over a percent, at New York, after a rebound from $1.4206, the weakest since January 1.

(Source: http://www.commodityonline.com/news/Plantation-Overview-Rubber-sustains-losses-coffee-buoyant-39031-3-1.html)

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