NEW YORK/LONDON: Raw sugar futures on ICE climbed on Friday to post the largest weekly gain in a month, as traders piled into the market to buy spot raw sugar on worry over potential supply tightness in top producer Brazil where rains hampered the start of the harvest.
Cocoa hit multi-month highs on short-covering, while arabica coffee fell in range-bound trading.
Delays to the early stages of the harvest in top sugar grower Brazil prompted buying of the front-month contract and pushed it to a premium of 0.19 cents a lb over the second-month contract, the highest since February. The spread <SB-1=R> was up from 0.05 cents a lb the previous session.
May raw sugar futures rose 0.19 cent, or 1.1 percent, to settle at 18.03 cents a lb, up more than 2 percent from last Friday's close in the largest weekly increase since mid-March.
The spot contract has been inching up from a more than 2-1/2-year low of 17.47 cents touched earlier this month amid expectations of record global output.
The July raw sugar contract rose 0.05 cent, or 0.3 percent, to finish at 17.84 cents a lb.
"It's some short-covering. Producers are taking some of their short hedges off, because of the rain and because of delays in the harvest," said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Advisor.
Heavy rain in Brazil's cane belt has slowed early progress of the cane harvest, a job made harder by tough, older cane left over from last year that still has to be gathered, a meteorologist and forecaster said.
"The new crop hasn't come in, and the mills are concentrating on ethanol. It could take some time for sugar to become available," said Michael McDougall, vice president for Newedge in New York.
He said that the long delivery period for sugar would likely prevent most delays, but price gains could trigger automatic buy stop orders held by speculators. Noncommercial dealers hold a record bearish stance in raw sugar futures and options.
The market also felt support on Friday from a "risk-off" day, pushing investors to cover short positions, Gentile said.
The benchmark Thomson Reuters-Jefferies CRB index, that tracks 19 commodity markets, was down, as were world equity markets.
Investors' desire to take risk off the table over global economic concerns induced short-covering in some markets where speculators hold bearish positions, Gentile said.
May white sugar on Liffe was up $4.70, or 0.9 percent, to settle at $522.20 a tonne.
COCOA BUILDS ON GAINS
July cocoa on ICE settled up $23, or 1 percent, at $2268 a tonne, after hitting $2,276, the second-month contract's highest level since late January.
The second-month contract was up more than 5 percent from last week's close, its largest weekly gain since early September.
A strong technical picture, as cocoa passed resistance earlier this week at $2,200 per tonne, had triggered further short-covering, dealers said.
"I think it's caught a lot of people by surprise because there is a lot of bearish talk out there," a London-based broker said, referring to expectations for a large West African mid-crop and a fall in Europe's quarterly grind data, an indication of demand.
Dealers and analysts expect a fall in Europe's first-quarter grindings data, due to be published by the European Cocoa Association on April 17.
Liffe July cocoa futures were up 16 pounds, or 1.1 percent, to close at 1,504 pounds a tonne after earlier hitting 1,512 pounds, their highest level since Dec. 19.
ICE July arabica coffee futures closed down 2 cents, or 1.4 percent, at $1.3715 per lb in range-bound trading. It fell more than 4 percent from last Friday's close.
Starbucks Corp said on Friday it would cut grocery list prices on its namesake and Seattle's Best packaged coffee by 10 percent or more on May 10 as coffee costs fall and it fights for sales in supermarkets and other retailers.
In top robusta producer Vietnam, dealers said rains should ensure another large crop although prices on the physical market remained firm as farmers withheld beans from the 2012/13 harvest in the hope of price increases.
"There's plenty of coffee around. It's a question of whether you want to pay for it," a London-based broker said. "Vietnamese sellers are trying to hold off."
The July robusta coffee future on Liffe closed up $21, or 1 percent, at $2,069 a tonne.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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