NEW YORK/LONDON: Raw sugar futures on ICE turned higher on Thursday as hopes that monetary stimulus in Japan will spur more buying lifted prices that had dropped to nearly three-year lows on the expectation that more Indian supplies will reach the global market.
Robusta coffee and cocoa futures on ICE Futures US and Liffe fell on spillover weakness from the weak commodity complex, weighed by an increase in new US unemployment benefit claims, reigniting worries about stalling economic growth.
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities made up of 19 markets, fell for the fourth straight day to a nine-month low as the US dollar was firm but off its highs.
A strong greenback often pressures dollar-traded commodities as it attracts selling by investors holding other currencies.
Dealers said the modest rise in sugar prices was linked to a radical overhaul of monetary policy in Japan which may fuel inflation.
"If inflation is on the rise in the Far East, the sugar bulls argue, then the large buyers out there will be increasing stocks sooner rather than later," Nick Penney of Sucden Financial said in a market note.
May raw sugar futures rose 0.17 cent, or 1 percent, to finish at 17.67 cents a lb, after falling to a session low at 17.50 cents. The front-month contract dipped to 17.47 cents on Wednesday, its lowest level since July 2010. Total volume soared above 113,000 lots, up nearly 20 percent from the 250-day average, preliminary Thomson Reuters data showed.
Dealers said any rebound in prices, however, may prove short-lived, given abundant global supplies.
"There is a clear downtrend. We have the potential to come down to 17 cents (a lb) on May," said VTB Capital analyst Andrey Kryuchenkov.
Analysts expect a large global surplus in 2012/13, the second consecutive season when production has substantially exceeded demand, and the early outlook for 2013/14 indicates another surplus season is likely.
"The relentless increase in global sugar supplies over the past few seasons, and expectations of another global surplus in 2013/14, remains the overwhelming factor pushing global prices lower," analyst Luke Mathews of Commonwealth Bank of Australia said in a market note.
India, the world's second-biggest sugar producer and No. 1 consumer, will no longer force mills to sell sugar to the government at a discount and will not limit the amount they can sell in the open market, Food Minister K.V. Thomas told journalists on Thursday after the cabinet agreed the changes.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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