Sarah McFarlane, Reuters | Aug 14, 2012 9:39 AM ET
LONDON — Raw sugar futures recovered some ground on Tuesday, trimming recent losses caused by improving prospects in top producers Brazil and India, while ICE cocoa was higher and coffee steadied.
Raw sugar rose as dealers eyed the strengthening domestic price in key producer India, which is expected to curb exports, after a weak start to the country’s monsoon rains.
“India’s domestic sugar prices have risen 25 percent since June on concerns over next season’s output, with festival demand for sugar which is nearing its seasonal peak, providing further support,” said Macquarie Bank in a sugar report.
“This is despite sugar prices on the international market having started to weaken, amidst a pick up in Brazilian crushing.”
Benchmark October sugar futures on ICE rose 0.19 cents or 0.9 percent to 20.58 cents a lb at 1133 GMT.
Dealers said lower prices were expected to stimulate demand on the physical market as importers looked to restock.
“The market has now retreated to a far more realistic level and with the RSI’s (technical indicator) now getting well oversold, this may offer end destination buyers a good opportunity to either buy more physicals or at least do some pricing,” said a London-based broker.
White sugar October futures on Liffe were $3.50 or 0.6 percent higher at $577.50 a tonne.
Cocoa futures were firm after closing below key technical support levels, indicating weakness in the recent uptrend.
Speculators large long position in both markets reflected concerns over weather phenomenon El Nino developing later in the year and cutting crop prospects.
“The speculative long position is huge. It’s the biggest it’s been since civil war in Ivory Coast in March last year. There are fears about the weather in West Africa and whether it will have an impact on the next main crop,” said a European commodities analyst.
ICE December cocoa futures were up $41 or 1.7 percent at $2,440, below Monday’s nine-month high of $2,501 per tonne.
Australia’s weather bureau said on Tuesday there were clear signs El Nino was developing in the eastern Pacific, raising concerns over the potential impact of the weather event on agriculture at time of soaring global food prices.
“El Nino has tended to have its biggest impact when it’s very severe and there’s no indication it’s going to be severe,” said the analyst.
Liffe December cocoa futures were up 24 pounds at 1,648 pounds per tonne, after hitting 1,678 pounds on Friday, their highest level since November.
Arabica coffee futures were steady, as ample beans on the physical market weighed, with top producer Brazil’s harvest nearing completion and quality concerns related to heavy rains in May and June easing.
“The weather (in Brazil) has improved, so recently the quality has been a lot better,” said the European commodities analyst.
“I don’t think the quality is as good as if we hadn’t had the rain. Fine cups are trading at a premium to semi-washed arabicas so there appears to be less fine cup beans.”
December arabicas on ICE were down 0.6 cent or 0.4 percent at $1.6645 a lb, above Monday’s six-week low of $1.66.
Brazil’s coffee harvest was 80 percent progressed by Aug. 9, agricultural analyst Safras e Mercado said on Monday, a slower pace than last year when 88 percent of the beans from that smaller crop had been gathered.
November robusta coffee futures were down $24 or 1.1 percent at $2,118 a tonne.
Dealers eyed the certified stocks in arabicas and robustas as an indication of demand switching into robustas.
“Arabica certified stocks are increasing, while robusta certified stocks are decreasing, which is a sign of a big shift away from arabicas into robustas,” said the analyst.