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Supply worries to lift coffee cocoa; sugar bearish -StanChart

* NY sugar to fall to 17 cents in Q4

* Tighter supply supports robusta, arabica to bounce * Cocoa prone to liquidation, awaits Indonesia crop

SINGAPORE, March 1 (Reuters) - Worries about supply could support coffee and cocoa this year but the outlook for sugar was bearish, with more sweetener expected to emerge from Brazil and Europe, Standard Chartered Plc STAN.L said on Monday.

Slowing demand in India, the world’s largest sugar consumer, would also weigh on global sugar prices, which had dropped to around 24 U.S. cents per pound since hitting a 29-year peak above 30 cents in early February.

“We expect prices to fall to 17 U.S. cents/lb in Q4-2010, averaging 21 cents/lb in 2010,” StanChart said in its quarterly analysis of commodity trends.

“In India, bulk buying has slowed following the government’s imposition of new stock limits on sugar. There is also evidence that the lingering impact of the global recession, as well as steeper market prices, are curbing demand among sugar consumers.” Raw sugar futures <0#SB:> ended at a 2-½ month low on Friday as the market wound up a wild month that saw it scale a 29-year peak and then suffer its biggest one-day loss in two years. [SOF/L]

Strong buying from India following a drop in local output had spurred rallies sugar futures, but StanChart said the market now deals with improving supply from top producer Brazil and the sale of out-of-quota sugar from the European Union.

“Based on data from Brazil’s Sugar Cane Industry Association, we expect sugar output this season to rise by 6.5 percent year/year to around 33 million tonnes, with supply becoming available from April,” it said.

“Furthermore, the EU’s decision to supply 500,000 tonnes of out-of-quota sugar to world markets - in excess of its WTO commitments of around 1.27 million tonnes - has reminded importers there may be available exportable stocks outside top three exporters Brazil, Thailand and Australia.”


An expected drop in output from main robusta producer Vietnam, declines in exports from Uganda, which is Africa’s largest producer, and falling inventories in Indonesia should support global prices, said StanChart.

Global coffee consumption could reach 134 million 60-kg bags in 2010, more than previously expected, the executive director of the International Coffee Organization said. [ID:nN25251936]

“We view fundamentals as bullish at this point, with Vietnam expecting a marginal decrease in its 2009/10 output to 18 million bags after typhoon and storm damage to its crops,” it said.

StanChart sees arabica prices bouncing to average $1.40 per pound, higher than the current price of around $1.31, as the market approaches the end of the 2009/10 crop season in main producer Brazil, where rains had affected output.

London's May robusta contract LRCK0 added $25 to end at $1,284 a tonne on Friday, while New York's May arabica contract KCK0 gained 1.40 cents to finish at $1.312 a lb.

New York's May cocoa futures CCK0 shed $5 to end at $2,917 per tonne. Cocoa has shed gains since hitting a 30-1/2-year top around $3,510 in mid-December on the prospect of a fourth consecutive global supply shortfall.

“Low global inventory-to-grinding ratios and a low end-user coverage ratio (19-year-low) are indicative of tight stocks and should be bullish for cocoa prices in the long term,” said StanChart.

But the risk of further long liquidation persisted following a build up in net speculative long positions in New York. “Moreover, we expect prices to average about $3,000 a tonne during Q2-2010 as Indonesian crops arrive as of April,” said StanChart, referring to output from the world’s third-largest producer. (Reporting by Lewa Pardomuan; Editing by Ed Lane)