NEW YORK/LONDON: Raw sugar futures on ICE fell the most in seven weeks on Friday and stemmed a five-week rally as a tumbling real and a quickening harvest pace in top grower Brazil left prices on the defensive.
Arabica coffee also fell under the currency pressure, while cocoa was little changed and underpinned by supply worries in Ivory Coast, the world's largest producer.
The October raw sugar contract on ICE Futures US fell 0.25 cent, or 1.5 percent, to settle at 16.94 cents per lb, its lowest close in over a week.
Losses picked up late in the session as the Brazilian real tumbled to a more than four-year low against the US dollar , despite government efforts to ease investor worries over the country's economy.
The weaker currency makes output increases and sales of dollar-traded commodities attractive as it reduces production costs and buffers against currency loss.
Sugar finished the week at a slight loss, snapping a recent string of gains. The front month hit a seven-week high of 17.29 cents earlier on Tuesday following a gain for each of the previous four weeks.
Prior to the day's drop, prices had rallied nearly 8 percent from a three-year low of 15.93 cents a lb in mid-July touched as expectations of huge Brazil supplies weighed.
"The weaker real is making it difficult to make any further headway, bringing in selling from Brazil," said Michael McDougall, senior vice president at brokerage Newedge USA in New York.
The softening currency also encourages cane mills to divert more cane toward sugar production over ethanol because of more attractive prices. Cane crushed in Brazil is used to produce ethanol for a largely domestic fuel market or sugar for the export market.
"Ethanol parity in Brazil is 14.79 cents per lb, so at the moment it's dramatically better to produce sugar rather than ethanol," said a European analyst.
Dealers monitored the harvest progress in Brazil, with expectations that the cane crush has ramped up after unfavorable weather earlier in the harvest.
October white sugar on Liffe finished down $1.20, or 0.2 percent, at $503.30 a tonne.
COFFEE FALLS, COCOA STEADIES
In arabica coffee December futures on ICE closed down 1.05 cents, or 0.8 percent, at $1.2365 per lb to post a 1.6-percent loss for the week.
Prices were seen consolidating for much of the session after gyrations earlier in the week and came under increasing pressure from the softening Brazilian real as the day wore on.
"After arabica saw dramatic swings north and south, we're pretty much back where we started the week price-wise," said Volcafe, the Swiss-based coffee division of commodity trade house ED&F Man.
Concerns over frost damage to crops in top grower Brazil prompted increases on short covering, though prices swiftly lost those gains as significant production losses in key growing regions were not seen realized.
Liffe November robusta coffee settled down $17, almost 1 percent, at $1,901 a tonne.
Dealers said another bumper crop was expected from the world's top robusta producer Vietnam after favorable weather. Producers holding off sales and concerns over tight stocks fuelled a price run-up in recent weeks.
"The local market is still expensive on light volume and farmers hold their stock tightly... just in front of a huge 2013/14 crop," said Volcafe.
December cocoa futures on ICE settled up $10, or 0.4 percent, at $2,495 a tonne to eke out a weekly gain. The second-month hit an eight-month high of $2,525 as it rose nearly 8 percent last week.
Disappointing pod reports on the development of top grower Ivory Coast's coming main crop, after the dry season began earlier than usual, continued to support prices, dealers said.
"The general idea is that a small deficit forecast for 2013/14 is becoming a larger deficit," said a European trader, warning it was too early for accurate forecasts.
December cocoa in London closed down 2 pounds, or 0.1 percent, at 1,650 pounds a tonne, easing from the 10-month high hit last week of 1,671 pounds a tonne.
Comments
Comments are closed.