London sugar nears record high

White sugar futures on Liffe rallied on Tuesday to close in on last week's record peak, with investors driven by prospects of South Asian and Indonesian demand. Arabica coffee futures fell further from last week's 16-month high while London cocoa edged higher, but was still some way off 32-year highs touched last week. The run-up in sugar prices has been driven by supply problems in top producer and exporter Brazil following excessive rains as well as strong demand from India.
"I see it (Tuesday's fall) more as a pause than any clear sustained downward move," said Barclays Capital analyst Nicholas Snowdon. "I think in our view there is definitely further to run in the sugar price rally. There hasn't been anything in the way of fundamental data over the past couple of days that has given a strong signal to the market to pullback," he added. March white sugar was up $8.40 or 1.3 percent at $676.80 per tonne at 1732 GMT. The contract hit a peak of $687.20 last week, a record high for the benchmark front month.
March raw sugar on ICE was up 0.55 cent or 2.15 percent at 26.17 cents a lb. The contract climbed to a peak of 26.94 cents last week, the highest level for the benchmark contract since February 1981. One dealer said March could soon pull back towards 24.00-24.50 cents a lb. A surge in sugar prices to the highest levels in more than 28 years is unlikely to lead to a major supply response and the commodity is struggling to attract needed investment, merchant Czarnikow said on Tuesday.
COFFEE SETBACK Arabica coffee futures on ICE were slightly lower as the market pulled back from an 16-month peak set last week. Dealers said prices remained underpinned, however, by supply tightness for good quality arabicas.
May arabicas were off 3.35 cent or 2.3 percent at $1.4220 per lb. "I think there are concerns over the quality of Brazilian coffee and you have also got the potential for the government to take a sizeable amount out of the market during the first quarter of next year," Snowdon of Barclays Capital said. March cocoa on ICE climbed $12 or 0.4 percent to $3,263, well below last week's peak of $3,510. "I think it (the pullback) is justified given the strength of port arrivals data in Ivory Coast," Snowdon of Barclays Capital said.