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SOFTS-Arabica coffee eases, near 34-year peak; sugar lower

Published 05/04/2011, 07:46 AM
Updated 05/05/2011, 03:49 PM
BIG
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* Egypt's SIIC cancels tender for 200,000 tonnes raw sugar

* Coffee price outlook seen bullish - trade

* Ivorian cocoa exports expected to pick up

(Adds trade comment, bylines, updates prices)

By Sarah McFarlane and David Brough

LONDON, May 4 (Reuters) - ICE arabica coffee futures edged lower on Wednesday but remained within sight of the prior session's 34-year peak, while sugar fell, weighed by an ample supply outlook.

Cocoa futures edged higher, although upside potential limited by easing political tensions in top grower Ivory Coast and prospects for a pick-up of cocoa exports later this week.

In coffee, arabica futures eased below Tuesday's 34-year high of $3.0890 a lb as tight supplies and strong demand supported prices.

"The outlook for prices is still very bullish, with a potential short term dip as we come into the Brazilian harvest," a London-based fund analyst said.

"The roasters are undersupplied on prices for next year ... they're hoping there's going to be a pullback."

Several lower-than-average crops from Colombia, a key producer of mild washed arabicas, have driven arabica futures to more than double in price over the past year.

"The big question will be Colombia next year," the analyst said.

ICE July arabica coffee was down 0.8 cent or 0.26 percent to $3.0535 per lb at 1109 GMT. The contract peaked at $3.0890 on Tuesday, a 34-year high.

Liffe July robustas were down $19 or 0.7 percent at $2,592 a tonne in thin volume of 2,681 lots, having earlier hit a contract high of $2,624.

Sugar futures fell, weighed by expectations of ample supplies from Brazil and Thailand, the possibility that India could authorise more unrestricted exports of the sweetener, and a cancelled Egyptian buying tender.

Egypt's state-owned Sugar and Integrated Industries Company (SIIC) has cancelled a tender to buy 200,000 tonnes of raw sugar and is expected to hold another tender soon, European trade sources said on Wednesday.

Tunisia tendered this week to buy two cargoes of white sugar for June and July arrivals, European trade sources said on Wednesday.

DOWNSIDE PRICE RISK

Some traders said ICE benchmark front-month July raw sugar futures could soon test key psychological support at 20 cents a lb.

"The prospects for the bulls are still seemingly worrying as it seems their best chance of a rebound will be either weather in Brazil taking a turn for the worse or some unforeseen political event," said Thomas Kujawa of brokerage Sucden Financial.

July futures were down 0.26 cent or 1.2 percent at 21.79 cents a lb at 1113 GMT, having dipped to 21.45 cents on Monday, the lowest level for the front month since September 2010.

Cocoa futures edged higher, consolidating after dipping lower on Tuesday, as industry buying supported prices.

ICE July cocoa was up $12 or 0.4 percent to $3,283 per tonne at 1115 GMT, while London July cocoa was up 9 pounds or 0.5 percent to 1,993 pounds per tonne in light volume of 2,006 lots.

"There is certainly industry buying around," a London-based broker said.

Dealers were also monitoring developments in Ivory Coast, where cocoa exports are expected to pick up slowly after months of inactivity.

Ivory Coast cocoa exports are likely to resume by Friday, but forecasts for its mid-crop harvest may be cut by a third from the expected 300,000 tonnes over security and logistics concerns in the hinterland.

"Cocoa is now at a stage where it's at relatively fair value considering West African weather will not be as good for the next crop," said a London based broker, adding that the quality of Ivory Coast's next crop was also likely to suffer after months of conflict in the country. (Editing by Jane Baird)

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