:. Food Industry News


Sugar Sets New Highs, May Consolidate Short-Term

Source: Reuters
12/05/2009

London, May 12 - Sugar futures rose to the highest levels in nearly three years on Tuesday, boosted by a weaker dollar and bullish fundamentals, and may hold around current levels in the short-term, dealers said.

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Coffee futures were also higher although cocoa futures in London eased as sterling rose and concern about a deteriorating demand outlook grew.

Sugar prices have risen sharply with fund and investor buying triggered by strong demand from top consumer India and declining global stocks.

"The buying has been largely speculative over the last few days, so we wouldn't be surprised to see the market consolidate round here (near term)," Jonathan Kingsman, managing director of consultancy Kingsman SA told Reuters Television on Tuesday.

July raw sugar on ICE stood 0.24 cent up at 15.85 cents a lb at 1135 GMT after earlier rising to 16.03 cents, the highest level for the benchmark front month since July 2006.

White sugar prices in London also rose with August up $3.50 at $447.90 after touching $453.90, also the highest level for the front month since July 2006.

Cocoa futures in London were lower with the market's decline driven partly by long liquidation by funds linked to the market's deteriorating fundamentals.

July cocoa in London stood 17 pounds lower at 1,702 pounds a tonne. The contract has fallen about 13 percent since early April.

"The tail of the Ivory and Ghana crops has wagged a little bit and the grind was bad in Q1 and is going to be worse in Q2," one dealer said.

LOWER GRINDINGS

The International Cocoa Organization forecast on Monday that global cocoa grindings are estimated to fall 6 percent in the year to September 2009, marking their biggest decline in half a century.

The ICCO also said a recovery in cocoa output in 2009/10 would lead to a global surplus of 150,000 tonnes.

Some, however, disputed the ICCO's bearish outlook.

"Supply will not recover as fast as is expected by the ICCO. We therefore anticipate that the cocoa market will remain in deficit next year," Commerzbank said in a report on Tuesday.

A weaker dollar helped to underpin prices on ICE with July up a marginal $2 at $2,472 a tonne.

Coffee prices edged up, boosted by a weaker dollar, as the arabica market consolidated just below Monday's 7-month high.

July arabica futures were up 0.35 cent at $1.2885 per lb. The contract rose as high as $1.3020 per lb on Monday.

"I think we can probably get to $1.40, then I think it is probably overdone. I don't think unless there is a significant cross commodity boom that we will see the market up to the highs of last year," one dealer said.

Front month arabica futures on ICE rose as high as $1.6960 per lb in February 2008, as investment funds poured money into commodities.

Dealers said robustas were struggling to keep pace, weighed by origin selling.

July robustas in London rose $8 to $1,516 per tonne.



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