Sugar declined in New York before what may be the smallest delivery for a March contract since 2006. Arabica coffee also fell.
Raw sugar delivered against the expired March futures contract will probably be 150,000 tons to 155,000 tons, the smallest for the March contract since 2006, said Fabienne Pointier, an analyst at Lausanne, Switzerland-based Kingsman SA, owned by McGraw-Hill Cos. Most of the sugar will be shipped from Central American nations and some from Brazil, she said. ICE will publish the delivery for the March futures later today.
Sugar for May delivery traded on ICE Futures U.S. gained as much as 2.8 percent yesterday, the biggest intraday advance for the contract this year. Brazil is preparing tax breaks that may channel more of the country’s sugar cane into ethanol production to meet additional demand, two people with knowledge of the plan said. That would mean smaller supplies of the raw material for millers to make the sweetener.
“There are still logistical constraints in Brazil because of competition with other crops, uncertainty over what will happen to taxes on ethanol, and possibly a disappointing Thai crop,” Pointier said today by phone. “The rally in the May futures yesterday was helped partially because of uncertainty over the ethanol tax.”
Raw sugar for May delivery dropped 0.3 percent to 18.34 cents a pound by 7:57 a.m. on ICE. White sugar for May delivery was 0.2 percent higher at $520.80 a ton on NYSE Liffe in London.
Raw sugar for March delivery expired yesterday at a discount of 0.01 cent a pound to the May futures. That reduced the incentive for traders to deliver sugar that is trading at a premium to the exchange, Pointier said. Raw sugar for loading this month at the Brazilian port of Santos was at a premium of 0.05 cent to 0.15 cent a pound to the ICE price on Feb. 23, according to Swiss Sugar Brokers. The sweetener from Thailand for loading this month through May 15 was at a premium of 0.7 cent to 0.8 cent on the same date, the data showed.
“Premiums paid for Thai and Brazilian sugar in the physical market discouraged traders from delivering on ICE as the March futures switched to a discount to May,” Pointier said. “Traders didn’t think it was worth delivering the most demanded origins with the spread at a discount.”
Ethanol in sugar equivalent terms was trading yesterday at 20.36 cents a pound, according to Kingsman. That’s 11 percent more than the May raw sugar futures closed on ICE yesterday.
Cocoa for delivery in May declined 0.8 percent to $2,117 a ton in New York. Cocoa for delivery in March slipped 0.5 percent to 1,402 pounds ($2,109) a ton in London.
Arabica coffee for delivery in May was down 0.2 percent to $1.429 a pound on ICE. Robusta coffee for delivery in May fell 0.3 percent to $2,101 a ton on NYSE Liffe.
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.