NEW YORK/LONDON: Raw sugar futures on ICE jumped more than 2 percent to a three-week high on Wednesday after the first 2014/15 crop forecast from Brazilian cane industry group Unica raised concern about crushing capacity.
Arabica coffee on ICE Futures U.S. pared gains on investor selling after the market extended the previous session's 8 percent surge to hit a 26-month peak, powered by downward revisions to Brazil's expected 2014/15 output due to drought. Cocoa on Liffe and ICE nudged higher.
May raw sugar futures on ICE jumped 0.43 cent, or 2.5 percent, to close at 17.42 cents a lb, the highest settlement since March 31. August white sugar on Liffe firmed by $7.10, or 1.5 percent, to end at $479.80 a tonne.
Unica, Brazil's main sugar and ethanol industry association, reported that 10 Brazilian cane mills are unlikely to open this year due to financial difficulties, with another 30 undergoing restructuring and several others "in very delicate financial situations."
"The overriding concern was less how much cane would be available ... but more what was the installed capacity available to crush it, and whether the weather would enable the mills to maximize that capacity," said New York-based Agrilion Commodity Advisers in a report.
"Those concerns will not have been helped by Unica's report this morning."
In its first formal forecast of the year for the world's biggest sugar producer, Unica said that a severe drought early this year has kept the center-south cane crop from reaching its full potential. It forecast the country's main center-south cane belt will produce 32.5 million tonnes of sugar in the new April-to-March season, down 5 percent from 2013/14 and at the low end of expectations.
Before the release of the data, the market had risen on the expectation of lower production.
The sugar market is also focusing on next week's expiry of the ICE May contract, with some dealers seeing Central American and Mexican sugars potentially delivered against the expiry.
ARABICA FALLS BRIEFLY IN LATE-DAY SELLING SPREE
Arabica futures turned negative just ahead of the settlement window as speculative selling hit the market, dealers said, but closed up a shade.
July arabica coffee futures on ICE settled up 0.55 cent at $2.1395 per lb, after climbing in light volume to a peak of $2.1900, the highest level for the second month since February 2012.
"The market could be headed for a period of lean supplies, and this is pushing prices," said Stefan Uhlenbrock, a senior soft commodities analyst at F.O. Licht.
Uhlenbrock said arabica coffee prices could eventually move above $3.00 a lb, to levels last seen in 2011.
The more moderate rise was on follow-through buying from Tuesday's 8-percent surge spurred by Volcafe, one of the world's biggest coffee merchants, which cut its 2014/15 coffee crop estimate for No. 1 grower Brazil by 10 percent to 45.5 million 60-kg bags. It also forecast a large global deficit of 11 million bags.
July robusta coffee on Liffe rose $14, or 0.6 percent, to close at $2,170 a tonne.
Cocoa on ICE was little changed in rangebound dealings, but hovered below the 2-1/2-year high reached in March as analysts continued to forecast a global deficit despite strong bean arrivals from top grower Ivory Coast.
ICE July cocoa inched up $2 to settle at $3,008 per tonne. July cocoa on Liffe closed up 10 pounds, or 0.5 percent, at 1,882 pounds a tonne.
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