Soft futures lower, cocoa falls amid slowing processing in Asia

Soft futures edged lower on Friday with robusta coffee en route to biggest weekly advance in 10 months, while cocoa declined as processing in Asia slowed down amid high reserves of powder but is still headed for a weekly gain.

On the NYSE Liffe, cocoa futures for September delivery traded at GBP1 515 a ton, down 0.39% on the day. Prices held in range between days high and low at GBP1 532 and GBP1 510 respectively. The bean has advanced 0.9% for the week so far after gaining as much as 5.7% during the preceding two.

Cocoa prices dropped as speculation arose processing in Asia may slow down for a second consecutive quarter amid high reserves of cocoa powder, according to the chairman of the Cocoa Association of Asia. Brandon Tay, chief executive officer of Guan Chong Bhd., a Malaysian cocoa processor, said cocoa processing, called grinding, may have plunged by 3% in the three months to June fro 140 062 tons in the first quarter.

Kona Haque, a London-based analyst at Macquarie Group Ltd., Australia’s biggest investment bank, said for Bloomberg: “There is overcapacity in cocoa processing in Asia, which is pressurizing prices and margins. This, along with high cocoa powder stocks, is leading to lower than expected grinding. End-use demand for chocolate products remains strong, we just need to get over this bump before things can improve.”

Robusta fairly unchanged

Robusta coffee swung between gains and losses and traded 0.05% lower on the day after trading on the upside for most of the day. Robusta for September delivery stood at $1 883 a ton at 14:05 GMT, ranging between daily high and low of $1 897 and $1 872 a ton respectively. Despite todays minor decline, robusta is headed for the biggest weekly advance in 10 months, up 4.21% on the week so far, as rainfall is expected to delay growing in the worlds third biggest grower, Indonesia.

MDA Weather Services in Gaithersburg, Maryland, said in a report yesterday that rainfall in Java has been persistently above average over the last several weeks.

Andrea Thompson, head of research and analysis at INTL FCStone Inc.’s CoffeeNetwork in Belfast, Northern Ireland, said for Bloomberg: “Six weeks ago rain was disrupting the new harvest in other areas as well. Most of Vietnam and Indonesia are holding back supplies seeing how much higher prices can go.”

Meanwhile on the ICE Futures Exchange, arabica coffee declined more than 2% on the day, trading at $1.2083 a pound at 14:02 GMT. Prices held in range between days high and low of $1.2433 and $1.2035 a pound respectively.

Elsewhere on the market, sugar for October delivery remained fairly unchanged throughout the day, trading at $0.1612 a pound, down 0.06% on the day. Prices varied between days high and low of $0.1619 and $0.1611.