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Raw Sugar Jumps to Highest in Nearly 3 Years

Source: Reuters
24/06/2009

London, June 23 - Raw sugar futures on ICE rose to the highest levels in nearly three years on Tuesday, boosted by investor buying and talk a major trade house will take delivery on the expiry of the July contract next week.

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Coffee prices fell, weighed partly by bearish comments made by Nestor Osorio, head of the International Coffee Organization while cocoa edged higher, boosted by industry buying.

Dealers said the trade house interest in taking delivery of raw sugar would be seen as a bullish sign with the market supported by a buoyant South Asian appetite for the sweetener.

"The bigger factor remains we still have a positive set of fundamentals underlying the market," one dealer said.

"There's good underlying trade buying and also support from some of the funds just looking to hold the market on the dips."

ICE October raw sugar was up 0.59 cent at 16.83 cents per lb at 1618 GMT after peaking at 16.95 cents, the highest level for the second month since July 2006.

July raws, which expire next week, stood 0.61 cent higher at 15.68 cents while London August white sugar was up $13.50 at $436.40 per tonne.

"Sugar is one of the best performers," said Romain Lathiere, Swiss-based fund manager with Diapason Commodities Management.

COFFEE WEAKENS

Coffee prices were lower as the market continued its downward retracement after rising sharply last month.

"I'd say this is the end of a big downward movement on many commodities, especially coffee," Diapason's Lathiere said.

New York's September arabica contract was down 1.55 cents at $1.1890 per lb, having hit a seven-and-a-half week low of $1.1785.

London robusta coffee futures for September were down $26 at $1,353 per tonne, having earlier sunk close to Friday's $1,325, the lowest level for the benchmark second month since the contract was relaunched in January 2008.

"Everything was maybe a bit exaggerated during the upturn movement, that's why the decrease is so massive," Lathiere said.

Nestor Osorio, head of the International Coffee Organization, told Reuters that Colombia, the world's number 3 coffee producer and top supplier of mild arabica beans, could catch up with delays in its coffee exports around October.

"The market's been relatively negative," a coffee trader said. "And this just weighs on the price."

Osorio also said Brazil could produce close to 60 million bags next year, up from 40-43 million in the prior season.

Cocoa futures in London, which have been falling steadily for nearly two weeks, edged upwards.

London September cocoa was up 12 pounds at 1,596 pounds a tonne, after touching a low of 1,578 pounds a tonne on Monday, the lowest level for the second month since mid-December 2008.

September cocoa on ICE was up $10 at $2,490 a tonne, having hit a four-week low of $2,466 a tonne in earlier trade.

"I think the market was due a bit of a bounce," a cocoa trader said.

"Technically we are on quite a key level of support and I think the longs will protect it and industry needs to buy, so I think the market will come up from here," the trader said.



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