China seen chasing rubber; coffee premiums firm

Monday, 2 January 2012 00:30 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): China is likely to snap up rubber next week before trading slows to a trickle ahead of the Lunar New Year holidays, while Vietnamese coffee prices will stay firm as roasters replenish stocks, dealers said on Friday.

Premiums for grade 2,5 per cent black and broken robustas are likely to be steady between $30 and $50 to London’s March contract next week as consumers chase nearby shipments before Tet, Vietnam’s biggest festival to mark the Lunar New Year.

“Tet is coming, so buyers have to cover January shipments as soon as possible. Shipments are still possible before the 15th,” said a dealer in Singapore who trades Vietnamese and Indonesian beans.

Vietnamese robustas were offered at premiums for the first time in at least a decade during harvests after a move by the government to tighten bank loans cut cash flow to exporters, who need money to buy beans from farmers.

Coffee supply from Vietnam’s largest growing province of Daklak is expected to slow next month when the harvest ends as most farmers and buying agents will wait for higher prices before selling, a senior provincial official said on Friday.

Premiums in Indonesia, the world’s second-largest robusta producer after Vietnam, could fall next week from $500 quoted last week because high prices discouraged demand.

Among other soft commodities, rubber prices could stay around $3.30 a kg next week on expectations top buyer China will step up purchases before the Lunar New Year holidays in late January.

Thai RSS3 rubber, the benchmark for physical prices in Asia, was traded at $3.36 a kg for February shipment this week. The grade struck a record at $6.40 a kg in February.

Purchases by China could also offer support for Tokyo rubber futures <0#JRU:>, which were set to close the year down more than 35 per cent on lingering worries about the debt crisis in Europe.

“China is buying February shipment because they don’t want the rubber to arrive during the long Lunar New Year holidays. They are not buying prompt rubber,” said a dealer in Singapore.

Cocoa butter, sugar premiums

Cocoa butter ratios, a key indicator of demand, were likely to stay at 1.0 times London futures <0#LCC:> next week until demand picks up again. Ratios plunged to an all-time low of 0.92 in December on ample supply and a slump in demand.

Chocolate sales normally surge in the main consuming regions of Europe and North America during several holidays, including Christmas, Valentine’s Day in February and Easter in the spring.

The Indonesian Cocoa Association said grindings in 2011 were at 240,000 tonnes, below total capacity of 629,000 tonnes, with at least eight grinders suspending operations due to financial constraints and problems with marketing.

In the sugar market, Thai raw sugar premiums could stay at 90 to 95 points to New York’s March contract on hopes that some consumers would be chasing the sweetener for shipment in the first half of January.

Thai white sugar premiums could be under pressure from sales from India, which needs to get rid of excess domestic supply.

Top consumer India will produce 25 million tonnes in the current crop year, higher than its annual demand of about 22 million – one of several bearish factors weighing on global sugar futures.

India has allowed exports of 1 million tonnes of sugar so far in the 2011/12 year.