SOFTS-ICE coffee surges after selling interest falls away
* Brazilian green coffee sales seen lower this year
* Kingsman widens forecast for 2012/13 sugar surplus
* Cocoa market keeps close watch on Liffe Dec premium
(New throughout, updates closing prices; adds analyst comment, second byline/dateline) NEW YORK/LONDON, Dec 7 (Reuters) - ICE arabica coffee futures surged on Friday, defying the weak trend in the commodity complex, on a wave of short-covering after chart-based indicators showed selling interest dried up after pushing the market to a 2-1/2-year low earlier this week. Cocoa eased as dealers eyed a widening front-month premium in London while raw sugar futures on ICE also fell as the prospect of a large global surplus in 2012/13 kept the market on the defensive. The Thomson Reuters-Jefferies CRB index, a benchmark for global commodities eased 0.4 percent as the U.S. dollar rose against the euro after a government report showed U.S. employment grew more than expected in November. Also weighing on the commodity complex were Europe's economic problems and uncertainty about budget discussions in the United States. March arabica coffee futures closed up 2.90 cents, or 1.9 percent, at $1.5385 per lb, rebounding from a two-and-a-half-year low of $1.4635 touched Wednesday. "That indicates you could very well have a bottom here in the coffee market," said Spencer Patton, founder and chief investment officer of Steel Vine Investment in Chicago. "Now that we saw yesterday hold its gains and here today you have a stronger market in the face of weaker outside markets, we could have an acceleration through the rest of the day." The short-covering is believed to be speculative without any fundamental reason, and the bounce is not expected to last long, Patton said. Though there was a surge in volume during the rally, overall volume was weak, with just over 15,000 lots trading, versus the 250-day average around 22,000 lots, preliminary Thomson Reuters data showed. "It seems to be a get-me-out day in commodities, which for coffee would mean buying," said Jack Scoville, an analyst with The Price Group on Chicago. The ICE arabica/Liffe robusta spread narrowed enough to attract dealers to buy arabica and sell robusta, Scoville said. The premium of arabica over robusta futures narrowed to around 53 cents per lb in intraday dealings, about a penny cheaper than the previous day's last trade. It later widened out to about 56 cents March robusta coffee on Liffe turned down $7, or 0.4 percent, to settle at $1,904 a tonne. "There is nothing at all for sale in Central America right now," Scoville added. The harvest in Honduras, Central America's biggest coffee grower, has been delayed, raising the premium on beans there and causing physical dealers to cover their short positions on those beans. Arabica coffee prices have been cut in half during the last 18 months with increasing supplies helping to dampen investor appetite for the commodity. "I don't see $1.50 (a lb) as the end of the potential slide. There is much more coffee coming to the market and $1.50 is still a level at which you can make a profit in Brazil," F.O. Licht analyst Stefan Uhlenbrock said. Despite it's large harvest, top grower Brazil is likely to ship about 5 million fewer bags of green, unroasted coffee this year than in 2011, the Council of Green Coffee Exporters said on Thursday, citing slower sales and weather-related delays.
"There is a lot of coffee in the hands of Brazilian producers which still has to find a home," Uhlenbrock said. Cocoa futures were lower with the focus on the recent widening of the front month spread in London <LCC-1=R>. The premium traded at 74 pounds after peaking at more than 80 pounds during the previous session as the open position on December was still well in excess of certified stocks just a few days before Wednesday's expiry. "If you don't have tenderable cocoa then you already should have focused on the March position," said a European trader. "If your short is on the December and your cocoa is not tenderable then you have a little bit of a problem. If you start sampling today I don't think you'll get grading sorted out before Wednesday, you could be lucky, but don't count on it." March cocoa on Liffe inched down 1 pound to finish at 1,546 pounds a tonne while March cocoa on ICE closed down $8, or 0.3 percent, at $2,412 a tonne.
WIDENING SUGAR SURPLUS Raw sugar futures on ICE were also lower in heavy volume, with the market weighed down by excess supplies. Consultancy Kingsman SA revised up its 2012/13 world sugar surplus estimate to 9.2 million tonnes raw value, citing increased supply from producers including Brazil and China.
March raw sugar on ICE settled down 0.15, or 0.8 percent, at 19.21 cents a lb. Total volume exceeded 121,000 lots, up 25 percent from the 250-day average, preliminary Thomson Reuters data showed. "We seem to be range bound 20/30 points either side of 19.50 in the short term but we feel there is more potential downside than upside," Thomas Kujawa of Sucden Financial said in a note. "We feel it's safer to sell a rally than buy a dip and we expect lower levels in the medium term," he added. March white sugar on Liffe closed down $3.00, or 0.6 percent, at $515.50 per tonne.
(Additional reporting by Sarah McFarlane in London; Editing by Alison Birrane and Sofina Mirza-Reid)