SOFTS – Cocoa Prices Decline as Ivorian Rebel Sparks Sale Off, According to Reuters

Ouattara Forces Advance Toward Major Ivorian Cocoa Port

Arabica coffee futures begin rebound after long decline

By Rene Pastor and Nigel Hunt

NEW YORK/LONDON, March 30 (Reuters) – U.S. cocoa futures fell to a two-and-a-half month low on Wednesday as investors anticipated a possible resolution to the power struggle in Ivory Coast, which could resume exports from the world’s leading cocoa producer.

Preliminary data revealed that trading volume in U.S. cocoa futures was double the 30-day average as investors sold off long positions now that Alassane Ouattara appears to be gaining the upper hand against incumbent Laurent Gbagbo.

New York’s May cocoa futures dropped $70 to finish at $2,987 per tonne. Over the past two sessions, the contract has lost 8.0 percent, marking its lowest settlement since January 13.

On London’s Liffe market, the July cocoa contract declined by 46 pounds, or 2.3 percent, closing at 1,948 pounds per tonne.

Forces loyal to Ouattara have taken control of Soubre, the last major town on the route to the cocoa port of San Pedro, according to local residents. Should Ouattara’s forces capture the San Pedro port, it would facilitate the flow of cocoa exports from the country, which have been stalled due to an export ban.

“There’s definitely some pricing in for a quicker resolution. If a quick solution is reached, we could see cocoa moving out of Ivory Coast quite swiftly,” said Keith Flury, a senior analyst at Rabobank.

“The political situation seems close to change in Ivory Coast,” added Sterling Smith, a senior analyst with Country Hedging Inc. in St. Paul, Minnesota. He noted that the trade is currently weighing whether Ivorian supplies will be shipped or if additional logistical or quality issues may arise.

The export ban imposed by Ouattara, along with EU sanctions and a collapse of the local banking system, has left over 450,000 tonnes of cocoa stocks in storage, raising concerns about their quality deteriorating.

"The sell-off is driven by speculators who had previously pushed prices up," Flury remarked.

The market’s technical outlook remains unstable, as the May contract fell below the 100-day moving average of $3,150 and the 200-day moving average of $3,042 earlier this week.

Coffee and Sugar Market Updates

Arabica coffee futures on ICE experienced an uptick as the market began to bounce back after a prolonged decline primarily influenced by bearish technical indicators. The fundamentals suggest a bullish outlook due to tight supplies of high-quality washed arabica beans.

"We have a bullish outlook for the upcoming season with an anticipated deficit. Prices should remain supported from this point forward," stated Flury.

New York’s May arabica coffee futures increased by 4 cents, reaching $2.6545 per pound, while London’s May robusta coffee contract rose by $14 to end at $2,524 per tonne.

Sugar futures showed mixed results as the market anticipated full-scale harvesting of the sugar cane crop in Brazil’s dominant center-south region.

“With the Brazilian crop on the horizon, it appears more prudent to sell into rallies than to buy dips intraday,” noted Sucden Financial in a market report.

May raw sugar futures rose by 0.31 cents to 27.33 cents per pound. London’s May white sugar contract gained $5.30 to close at $707.80 per tonne.

Smith commented that if the May raw sugar contract falls below the 200-day moving average of 25.90 cents, the market could test the 24.50-cent area, which represents a 50 percent retracement of the move from May 7, 2010, low of 13 cents to the February 2, 2011, peak of 36.08 cents.

Prices as of 1650 GMT