Bloomberg News

Sugar Falls as Surplus Weighs; Coffee Drops; Cocoa Gains

May 18, 2012

Raw-sugar futures fell for the first time this week on concern that global supplies will outpace demand even as output slides in Brazil, the world’s biggest producer. Coffee also dropped, while cocoa rose.

There will be a sugar surplus of as much as 6 million metric tons, Nick Penney, a senior trader at Sucden Financial Ltd in London, wrote in a report today. The crop in Brazil’s center south, the country’s main growing region, may be as low as 470 million tons, Sucden said. The forecast is lower than last year’s crop of 493.3 million tons, and below industry group Unica’s estimate of 509 million tons.

“There is still much supply in other producing countries, and Brazil, while remaining in the headlines, may not be as much of a factor this year as its disappointing crop was last year,” Penney said in the report.

Raw sugar for July delivery slid 1.9 percent to settle at 20.47 cents a pound at 2 p.m. on ICE Futures U.S. in New York. The commodity still posted a 1.2 percent weekly advance, ending a seven-week slump.

Prices may fall to 19.5 cents in the “medium term” and possibly as low as 18.5 cents, making it more profitable to produce ethanol from cane crops rather than refined sweetener, Sucden said.

“The world surplus will weigh on July and October” futures contracts, Jeff Bauml, a senior vice president for R.J. O’Brien & Associates in New York, said in a telephone interview.

Arabica-coffee futures for July delivery fell 0.5 percent to $1.7915 a pound on ICE.

Cocoa futures for July delivery climbed 2.2 percent to $2,273 a ton in New York.

In London futures trading, refined sugar fell, while robusta coffee and cocoa rose on NYSE Liffe.

To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net; Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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