London, May 7 - Sugar futures hit a fresh 2-3/4 year high on Thursday on follow-through investor buying supported by stronger oil prices, while arabica coffee futures hit a 7-month peak and London cocoa rose on rollover business.
"We're seeing some follow-through buying in sugar as part of the general euphoria in stock and commodity markets," said Pierre Sebag of consultancy Sugar K Ltd in London.
World stocks rose more than one percent on Thursday to their highest levels of 2009 as investors bet on a stabilisation of the ailing world banking system, battered emerging markets and the global economy at large.
Expectations of strong demand from India, the world's biggest sugar consumer, have driven the sugar market to successive 2-3/4 year peaks in the last few days.
Dealers also said a trade house has been pushing the market higher in recent weeks.
A European broker reported from New York sugar dinner week that the market outlook appeared to be well-supported.
"Everyone agrees that there is more potential on the upside than the downside," the broker said in a daily market report.
Strong oil prices bolstered the sugar market, dealers said.
Oil rose towards $58 a barrel on Thursday, hitting a fresh 2009 high, as a surge in global stock markets raised expectations of economic improvement and a subsequent increase in demand for oil products.
The link between sugar and oil prices comes from the use of sugar cane as a feedstock for green fuel ethanol.
ICE July raw sugar futures rose 0.17 cent to 15.53 cents per lb at 1127 GMT, having earlier touched a fresh 2-3/4-year peak of 15.59 cents per lb.
London August white sugar futures rose $1.60 to $451.00 per tonne in thin volume of 1,203 lots, after hitting a 2-3/4 year high of $452.30.
Arabica coffee futures on ICE set a fresh 7-month high before falling back as the dollar strengthened. Robusta futures in London also fell.
"I think we are looking at the dollar. It (the dollar) was a little bit weaker earlier but it is firming up a bit now and I think that is why we've had a switch in direction," one London dealer said. July arabicas on ICE climbed to a peak of $1.2580 per lb, the highest level for the second month since October 2008, but stood 0.80 cent lower at $1.2410 at 1140 GMT.
Dealers said the rise had been largely driven by technical factors while some were also looking to take long positions ahead of the frost season in top producer Brazil.
"I think people are buying into all the rumours and models of a frost. We are not going to be certain until June or July whether we are going to get one and technically it is looking very sound," one dealer said.
Robusta futures have barely responded to the run-up in the arabica market with the latter's premium rising to around 56.50 cents a lb, basis July/July.
Dealers noted, however, that investment bank Fortis on Wednesday had forecast a drop in robusta production in 2009/10 and some argued the premium may now be too wide.
"The outlook for robusta has improved as Vietnam may reduce its output at current price levels," Commerzbank said in a report on Thursday.
Dealers said hedge selling from Indonesia weighed on the robusta market on Thursday.
July stood $24 lower at $1,489 a tonne.
In cocoa, futures prices rose on activity centred on the front-month spread, with the London market tracking ICE futures.
"Yesterday we tested support levels which seemed to have held," a dealer said, and referred to currency-related buying on Thursday.
Traders focused on the outlook for the mid crops in top grower Ivory Coast, noting that recent favourable weather augured for production at a similar level to last year.
ICE July cocoa futures were up $58 or 2.45 percent to $2,426 per tonne at 1145 GMT, while London July cocoa was up 29 pounds to 1,705 pounds per tonne.