Bloomberg News

Sugar Rises as Investors Prepare for Index Changes; Cocoa Gains

December 27, 2012

Sugar climbed for a second day in New York on speculation some investors are buying the futures as they prepare for annual weighting changes in commodity indexes next year. Cocoa rose and coffee slid on ICE Futures U.S.

Index funds are set to buy about 30,000 sugar futures in early to mid-January as the Dow Jones-UBS Commodity Index and the Standard & Poor’s GSCI gauge make their annual changes to weightings, according to London-based broker Marex Spectron Group. Large and small investors excluding index funds were net- short, or betting on lower prices, by 62,668 contracts in the week ended Dec. 18, data from the U.S. Commodity Futures Trading Commission compiled by Bloomberg showed.

“Volumes are really thin today and the market may be gaining some support from funds, which held large net-short positions,” Marcos Mine, a risk manager at the Sao Joaquim da Barra, Brazil-based mill Usina Alta Mogiana S/A, said by phone today. “Some investors may also be getting ready for the index rebalancing early next year, which could give support to sugar and be a good opportunity for millers to sell.”

Raw sugar for March delivery gained 0.7 percent to 19.18 cents a pound by 6:32 a.m. on ICE in New York. It rose as much as 1.1 percent yesterday. White, or refined, sugar for March delivery was little changed at $516.30 a ton on NSYE Liffe in London. The bourse was closed the past two days.

Trading in ICE sugar was about 50 percent lower than the 30-day average for the time of day.

Sugar declined 18 percent in New York and 14 percent in London this year as supplies will outpace demand. Global sugar supplies will be 7.8 million tons higher than consumption, London-based Czarnikow Group Ltd. said on Dec. 19. That’s an increase of 9.9 percent from its previous forecast.

Brazilian Output

Sugar cane output in Brazil’s center south, the main growing region of the world’s top grower, may be a record 580 million tons next season, Antonio de Padua Rodrigues, technical director at industry group Unica, said on Dec. 20. This year’s crop will be 532 million tons, up from a previous forecast of 518.5 million tons, according to the group.

“I don’t think any rally will be sustained,” Mine said. “Unica is already forecasting 580 million tons of cane for next year and this cannot be overlooked.”

Cocoa for March delivery gained 1.1 percent to $2,288 a ton ICE. It gained 8.5 percent this year. Cocoa for March delivery fell 0.5 percent to 1,452 pounds ($2,351) a ton on NYSE Liffe. The commodity was still up 5.2 percent this year.

Arabica coffee for March delivery was down 0.8 percent to $1.471 a pound in New York. It’s fallen 35 percent this year. Robusta coffee for March delivery advanced 0.6 percent to $1,917 a ton in London, 5.9 percent higher this year.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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