CORRECTED-SOFTS-ICE raw sugar climbs, cocoa down in technical dealings

Thu Jul 25, 2013 4:25pm EDT

Related Topics

(Corrects paragraph 10 to "hydrous" instead of "anhydrous")

* Early gains drive technical buying in raw sugar -dealers

* ICE cocoa climbs to six-week high, hits resistance

* Arabica coffee buying picks up after London stocks fall

By Chris Prentice and Sarah McFarlane

NEW YORK/LONDON, July 25 (Reuters) - ICE raw sugar posted the biggest gains since early July on Thursday, recovering from a recent three-year low, as rains in top grower Brazil spurred trade buying and further technical gains, while ICE cocoa fell back from the highest level since mid-June.

ICE arabica coffee futures rallied after exchange data showed a steep drawdown in London robusta stocks.

The softening U.S. dollar provided support to dollar-traded commodities, making them less expensive to holders of other currencies.

October raw sugar on ICE Futures U.S. finished up 0.25 cent, or 1.5 percent, at 16.39 cents per lb, as gains early in the session spurred technically driven buying, dealers said.

The initial buying may have been trade buying "as unexpected rain overnight in Brazil has led to more shutdowns," Michael McDougall, senior director of the Brazil desk for Newedge in New York, said in a daily report.

Recent heavy rains have caused mill shutdowns, stalling crushing of Brazil's bumper cane crop and prompting a slight recovery for front-month prices that touched a three-year low of 15.93 cents per lb last week.

Prices have been weighed down by an expected bumper crop in Brazil, where the harvest pace picked up in the first half of July.

Mills in the country's main cane region boosted sugar output in the first half of the month after rains slowed crushing at the end of June, recent data showed. They also increased the amount of cane diverted to sugar production to 45.4 percent from 41.9 percent.

"So far at least, the mills in Brazil have been running mostly to produce ethanol," Bunge Ltd Chief Executive Soren Schroder told Reuters after the agricultural trading house reported second-quarter earnings.

"At the moment, it's a toss-up between hydrous ethanol and sugar. Hydrous and sugar prices are close."

Traders have said increased ethanol production in Brazil will support global sugar prices, helping erode large global stocks of the sweetener.

October white sugar on Liffe edged up $2.50, or 0.5 percent, to settle at $477.10 a tonne.

COCOA HOVERS NEAR TECHNICAL RESISTANCE

September cocoa futures on ICE closed down $13, or 0.6 percent, at $2,347 a tonne.

The contract climbed to $2,381, the highest level since June 12, in largely technically-driven buying but encountered strong resistance in the $2,350-$2,400 range, dealers said.

"I don't think the dry weather is enough to push it over the top. We would need another catalyst, which so far is nowhere to be seen," said Hector Galvan, senior market strategist for RJO Futures in Chicago.

Concern that dry weather in West Africa would affect supplies in the world's top producing region has contributed to recent gains.

The cocoa market will likely be in a supply deficit in 2013/14, though it will be smaller than previously forecast, with output in Ivory Coast and Ghana expected to climb and demand fragile.

December cocoa in London lost 4 pounds, or 0.3 percent, to settle at 1,591 pounds a tonne.

ICE September arabicas rallied 3.55 cents, or 2.9 percent, to close at $1.2480 per lb.

Arabica coffee extended earlier gains after Liffe data showed a big drawdown on robusta exchange stocks, reported after the London market closed, a U.S. trader said.

Coffee stocks fell by 17,500 tonnes to 98,250 tonnes, according to Liffe data.

Earlier gains were seen on the weakening U.S. dollar and short-covering after the September contract fell nearly 4 percent during the previous session, dealers said.

Indications that coffee crop damage would be limited after forecasts for a cold snap in Brazil, the world's largest producer, drove Wednesday's big loss. Prices rallied to a near two-month high of $1.34 per lb last week.

Widespread rains are weakening a harsh cold front that just missed the country's southern coffee regions over the past couple of days, weather forecasters at Somar said.

An outbreak of leaf rust disease in Central America is unlikely to boost coffee futures prices, which are near their lowest level in four years, because a record crop in Brazil will fill the gap, a Reuters poll found.

Liffe September robusta coffee rose $12, or 0.6 percent, to finish at $1,908 a tonne, reversing earlier losses. (Additional reporting by Tom Polansek in Chicago and Marcy Nicholson in New York; Editing by Kenneth Barry and John Wallace)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.