Tokyo rubber futures at 8-month high; rally expected this week as well

(Reuters): Global benchmark Tokyo rubber futures could extend the current rally next week after a decline in the yen spurred buying from speculators, while rising global supply is set to cut Thai raw sugar premiums, dealers said on Friday.

The most-active rubber contract on Tokyo Commodity Exchange, currently June hit a high of 312.4 yen, the highest for any benchmark since May, which was also driven by a fiscal deal to avoid a recession in the United States.

“It looks like rubber will get strong support at 300 yen. I don’t think it’s going to fall after the United States managed to avoid a ‘fiscal cliff’, at least temporarily,” said a dealer in Kuala Lumpur.

“It should trade between 300 and 320 yen in the short term.”

The Tokyo market typically sets the tone for physical prices, but futures contracts are often influenced by macroeconomics. It ended 2012 with a 15 percent gain on a weaker yen, higher stock markets and speculation over buying by China before the Lunar new year holiday next month.

In the sugar market, Thai raw sugar premiums, which stood at 75 points to New York’s March contract this week, could slip as crushing in Thailand is still progressing despite occasional rains, and as supply improves elsewhere.

The International Sugar Organization has raised its forecast for a projected global sugar surplus in 2012/13 to 6.18 million tons, raw value. That was higher than a previous forecast of 5.86 million tons, but remained below the 6.99 million estimated for 2011/12.

About 22.144 million tons of cane has been crushed as of Jan. 1, down from about 22.433 million tons in the same period in the 2011/12 season. Sugar output has reached about 1.831 million tons so far this season, down from 2.077 million tons, according to the latest dealer estimates.

The 2012/13 crushing season started on Nov. 15 and will last through April. Thailand is the world’s second-largest sugar exporter after Brazil.

Physical trading is expected to pick up in second-largest producer robusta Indonesia next week after Christmas and New Year holidays. Vietnamese beans could be offered at bigger discounts because roasters seem to be well-stocked before the Tet lunar new year holiday next month.

Vietnam grade 2, 5 percent black and broken beans stood at discounts of $30 to $40 this week, bigger than $20 discounts in the middle of December, because of ample supply.

Indonesia’s, Sumatran grade 4, 80 defect beans were unchanged at premiums of between $100 and $150 to London’s March contract as farmers await a small crop to start later this week.

Cocoa butter ratios could stay at the current level at 1.90 times London futures because of the firm physical market in Europe as well as worries about supply in top cocoa bean producer Ivory Coast.

Ivory Coast expects its cocoa output to dip 13 percent this season to 1.289 million tons due mainly to a lack of investment in ageing plantations, a top official at the Coffee and Cocoa Council said in an interview on Thursday.