SOFTS-Raw sugar futures climbs, focus on May expiry

May raws expiry a key focus in the sugar market

* Nearby discount for robusta coffee widens

LONDON, - Raw sugar, cocoa and coffee prices rose on Tuesday as soft commodity markets began to recover after Monday's swine flu-inspired setback.

Trading in raw sugar futures was dominated by rollover business ahead of expiry of the ICE May contract on Thursday, against a backdrop of firm market fundamentals, dealers said.

"The fact is that physical supply of sugar is tight and demand remains robust," said Nick Hungate, a soft commodities trader with Rabobank.

"Sugar continues to be relatively robust and to hold up in spite of the onslaught of negative macroeconomic factors," he added, referring to worries over swine flu and the bank sector.

Some dealers said a good-sized delivery tonnage was a possibility, but the final tonnage would depend on structural trades over the next couple of days.

Dealers said India's appetite for sugar imports from the international market had become a background factor, while traders' attention was focused on the expiry.

India, the world's biggest sugar consumer, has swung from net exporter to importer.

ICE July raw sugar was up 0.11 cent at 14.00 cents per lb at 1650 GMT, while London August white sugar futures settled $0.40 higher at $418.40 per tonne.

NEARBY DISCOUNT

Robusta coffee futures in London inched up with volume boosted by rolling forward of positions out of May into July, dealers said.

They noted the front month had weakened to a discount of about $22 to July, compared with a similar sized premium last week, with producers rolling forward long positions.

"It may widen a bit further but I think you are now at a level where traders are happy to buy," one dealer said.

Benchmark July robustas ended $1 higher at $1,471 a tonne.

Arabica futures on ICE also edged higher with the market consolidating after a sharp setback on Monday when concern about a flu outbreak sparked widespread losses in commodity markets.

July arabicas were up 0.90 cent at $1.1630 per lb.

Dealers noted key support around $1.14, basis July, held during Monday's setback and was again tested on Tuesday but once again was not breached.

The market had a sharp run-up last week when a bunch of buy-stops were triggered when through resistance around that level.

"If we can hold that level ($1.14) there is a chance we can recouple some of the losses from yesterday but it is all looking very flat at the moment," one dealer said.

Cocoa futures also rebounded after sliding on Monday.

Dealers noted a lack of industry buying and origin selling, saying the market was dominated by two-way investor dealings and routine hedge activity (Against Actuals) in thin volumes.

London July cocoa ended 16 pounds higher at 1,738 pounds per tonne. Dealers saw support in July at 1,716 pounds and resistance at 1,754 pounds.

ICE July cocoa settled $23 higher at $2,404 per tonne.

source: reuters