BS: Sugar Gains as USDA Cuts Production Forecast; Coffee Declines
By Stephen Morris
Nov. 19 (Bloomberg) -- Sugar rose for a third day in London and New York after the U.S. government cut its forecast for world production, stoking concern about supply. Coffee fell after Kenya said output may gain.
Global sugar production will be 161.9 million metric tons in 2010-11, below a May estimate of 163.8 million tons, the U.S. Department of Agriculture said. The estimated surplus was cut to 3 million tons from 6.2 million tons, and “prices are increasing due to tightening supply and to appreciation of the Brazilian real,” the USDA said.
“It is always important to follow the currencies of the main producers,” said Connor Noonan, an analyst at Castlestone Management Ltd. “If the dollar is dropping relative to the Brazilian real, exporters will need much higher prices.”
White, or refined, sugar for March delivery added $15.50, or 2.2 percent, to $724.20 a ton on NYSE Liffe at 10:40 a.m. London time. Yesterday the sweetener gained 5.7 percent, the biggest increase for a most-active contract since Oct. 29, 2008. Prices have dropped 11 percent since Nov. 11, when they reached $811, the highest level since at least 1989.
The real has strengthened 35 percent versus the dollar since the start of 2009, making it the second-best-performing emerging-market currency over the period after South Africa’s rand. Brazil is the world’s biggest sugar producer.
Indian Yields
Indian sugar production, the world’s second-largest, may be 8.7 percent less than predicted because of lower yields in the country’s biggest cane-growing state, according to 810 farmers interviewed by SGS SA for Bloomberg. Brazil “will likely have run down its exportable sugar surplus to zero by January,” Australia & New Zealand Banking Group Ltd. said yesterday.
Raw sugar for March delivery gained 0.84 cent, or 3 percent, to 28.99 cents a pound on ICE Futures U.S. in New York. Yesterday the sweetener soared 6.3 percent, the biggest gain for a most-active contract since Oct. 7.
Prices also advanced as the dollar weakened, making raw materials priced in the currency cheaper in terms of other monies. The euro climbed for a third day as officials of the European Union, International Monetary Fund and European Central Bank spent a second day in Dublin before a possible bailout of Ireland’s banks.
“Assuming all those euro-zone issues with Ireland sort themselves out, we should go back to trading fundamentals, which have been pretty bullish across the soft commodities,” Castlestone’s Noonan said.
Coffee Crop
Kenyan coffee production may rise as much as 15 percent in 2010-11 because of improved weather, according to the Coffee Board of Kenya. Production in the 12 months through next September may range from 49,000 to 55,000 tons, James Wahome, quality manager at the board, said today.
Robusta coffee for January delivery fell 0.9 percent to $1,894 a ton on NYSE Liffe, paring yesterday’s climb of 2.9 percent. Arabica coffee for March delivery also declined, losing 0.6 percent to $2.0995 a pound in New York.
Cocoa for March delivery fell 0.3 percent to 1,926 pounds ($3,097) a ton in London. The chocolate ingredient for March delivery also slid in New York, dropping 0.5 percent to $2,925 a ton.
--With assistance from Pratik Parija in New Delhi and Fred Ojambo in Kampala. Editors: Dan Weeks, Nicholas Larkin.
To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
