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Raw Sugar Sets 3-Year High as Funds Buy

Source: Reuters
29/06/2009

London, June 29 - Raw sugar futures rose to a three-year peak on Monday, buoyed by fund buying and strong interest in taking delivery against the July contract which is due to expire on Tuesday.

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Coffee futures were also higher, supported by a pick-up in roaster buying following a sharp decline in prices while cocoa was mostly steady.

Dealers said there was widespread talk that Cargill was looking to take delivery of sugar against July, possibly to supply customers in South Asia.

Such a move would mirror a similar situation on the expiry of the May contract earlier this year when there was a large delivery of 842,252 tonnes with trade reports that Cargill took the sugar, much of which may also have been bound for India.

Cargill sources have declined to comment.

Dealers said the strong rally in prices in the last couple of weeks would normally have run into heavy selling from Brazilian producers but the credit crunch was limiting their ability to hedge forward.

"If someone is lighting a fire and no one has any water to extinguish it, the fire is going to develop in a big way and this is what is happening at the moment," said Pierre Sebag of consultancy Sugar K.

WEAK MONSOON

Dealers said the market was also boosted by renewed fund buying interest over the last couple of weeks and constructive fundamentals with concern that a weaker-than-normal monsoon may curtail crops in top consumer India.

An Indian farm ministry official said on Monday, however, that sugarcane acreage is likely to rise to last year's level as monsoon rains revived after a patchy spell.

October raw sugar futures on ICE rose 0.30 cent to 17.61 cents per lb by 1210 GMT after peaking at 17.82 cents, a three-year high for the second position.

London August white sugar futures stood $5.90 higher at $453.00 per tonne.

Robusta coffee futures were higher, boosted partly by a pick-up in demand from roasters following last week's decline to contract lows.

"Roasters have been buying. I think it has probably gone weaker than they thought," one dealer said.

Dealers said volume had been boosted by rolling forward of positions out of July ahead of Wednesday's first notice day.

London's September robusta contract was up $7 to $1,301 per tonne, having touched a contract low of $1,250 on Thursday.

"The market has shown itself to be pretty fragile so a test (of support at $1,250) seems quite feasible in the run-up to first notice day," one dealer said.

Arabica futures on ICE were higher with the market slowly regaining some ground lost during the steep decline in prices during the first three weeks of this month.

September arabica futures on ICE rose 1.10 cents to $1.203 per lb.

"We're missing a catalyst. It needs something to make people want to buy it and it's not there at the moment, though something may change," one dealer said.

Cocoa futures showed mixed trends, with a strengthening in the value of the pound weighing on prices in London.

Dealers said the market was consolidating after sliding to a six-month low in London last week although the prospect of weak second quarter grinding data could cap the upside. European and U.S. grinding figures will be released in early July.

"It seems to be picking up from the bottom of the range but negative grind reports could cap anything to the upside," one dealer said.

September cocoa in London was off 3 pounds at 1,628 pounds a tonne. The contract touched 1,573 pounds on Thursday, a six-month low for the second position.

September cocoa on ICE was $5 higher at $2,558 a tonne.



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