SOFTS-Raw sugar hits 6-1/2 mth high; coffee up, cocoa dips

Wed Oct 2, 2013 3:43pm EDT

* Sugar market digests October delivery, Dreyfus deal

* Impact of rains on Brazil's cane crop also boosts sugar

* Arabica up after weaker dollar

* Cocoa down after Reuters story on Cargil-ADM deal

By Barani Krishnan and David Brough

NEW YORK/LONDON, Oct 2 (Reuters) - U.S. raw sugar futures hit 6-1/2 month highs on Wednesday as traders and investors focused for a second day on the biggest sugar purchase in more than two decades by a single merchant, Louis Dreyfus.

Concerns over the impact of rains on Brazil's cane output also underpinned the sentiment in raw sugar.

Arabica coffee rose in New York after a weaker dollar boosted commodities priced in the U.S. currency. The 19-commodity Thomson Reuters-Jefferies CRB index was up nearly 1 percent as the dollar hit an eight-month low against the euro.

Cocoa fell slightly in both London and New York trade after an exclusive story by Reuters that Cargill was in the final stages of a deal to buy Archer Daniels Midland's cocoa business.

Raw sugar for March settled up 0.19 cent, or 1 percent, at 18.51 cents a lb on ICE Futures U.S. The session high was 18.56 cents, which marked a 6-1/2 month peak.

The gains followed a 1 percent rally on Tuesday which was sparked by the largest delivery of raw sugar in at least 24 years against ICE's expired October contract.

Term Commodities, an unit of Louis Dreyfus, was the sole recipient of the 29,344 lots delivered against the expired contract, which amounted to 1.49 million tonnes of sugar.

"It is possible March could reach 19 cents, which is a far cry from the 16-cent lows seen earlier in the year," said Nick Penney at brokers Sucden Financial Sugar in London.

"We are waiting to see if the demand is still there at these higher levels."

Dealers said they were watching out for vessel nominations that would likely follow from the delivery to Louis Dreyfus.

Many were also studying the impact of rains in Brazil and how that was affecting the world's largest sugar producer. Traders said Louis Dreyfus would be in a stronger position to find buyers for the sugar if the Brazilian rains slow down production.

In white sugar, the December contract on London's Liffe closed up $3.50, or 0.7 percent, at $492.20 a tonne.

COFFEE UP, COCOA DOWN

In coffee, prices for both arabica and robusta rose.

Arabica's December contract on ICE settled up 0.35 cent, or 0.3 percent, at $1.1445 per lb.

The front-month arabica contract had dipped to $1.1105 on Sept. 17, a more than four-year low, pressured by a huge "off-year" harvest in No. 1 producer Brazil.

The rains now in Brazil also augured well for development of the "on-year" 2014/15 crop, traders said.

"I could see more leeway to the downside (in arabica prices)," said Stefan Uhlenbrock, senior soft commodities analyst at F.O. Licht.

Liffe's robusta coffee for January rose $19, or 1 percent, to close at $1,662 a tonne. The benchmark second month contract had slumped to $1,596 on Friday, a three-year low.

Robusta prices rebounded even as dealers expected production in top grower Vietnam to gather pace this week, heading toward another large crop.

In cocoa, ICE's December contract slipped $2 to $2,632 per tonne at the close. The front month climbed to $2,657 on Sept. 19, a one-year high.

December cocoa on Liffe settled down 4 pounds to 1,687 pounds a tonne.

Prices dropped as market participants digested Cargill's pending purchase of Archer Daniel Midland's cocoa business. The deal is expected to create a company big enough to compete with Zurich-based Barry Callebaut, the world's largest maker of industrial chocolate products.

"It's too much consolidation. It's not good for the market in general," a veteran industry source said, commenting on the deal.

"When you have that much of a concentration in the market, it's tough for independent trading companies to make the money they should make. They have one buyer less, so they'll have to beg Barry Callebaut and Cargill to buy their beans."

In industry news, top cocoa producer Ivory Coast announced on Wednesday it has raised the guaranteed minimum farmgate price for cocoa to 750 CFA francs ($1.55) per kilogram for the 2013/14 main crop, from 725 CFA francs in the last season.

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