Sugar futures turned lower on Thursday with concerns about the outlook for demand weighing on the market, dealers said. Coffee prices were higher as oil led an advance in many commodity markets while cocoa on ICE was little changed. Benchmark ICE May raw sugar futures eased 0.08 cent to 12.74 cents a lb by 1558 GMT, well below the days high of 13.05 cents, while London May white sugar was off $1.50 at $392.40 per tonne.
Dealers said the sugar markets weakening structure had raised questions about consumption with May at a discount of almost 70 points to July compared with almost level money three months ago. "Everyone has been taken by surprise with the weakness in the spread structure which raises question marks about consumption," one dealer said.
On Wednesday, Morgan Stanley raised its estimate for the 2008/09 global deficit to 7.9 million tonnes from a previous projection of a deficit of 1.8 million. Dealers said, however, much could depend on the impact of the financial crisis on demand. Morgan Stanley assumed one percent demand growth in 2008/09 but there has been some talk it could fall by around two percent.
"Should this be the case (a drop in demand), then the reversal of between three and four percent from previous forecasts would virtually wipe out the deficit," brokers Sucden UK said in a report on Thursday. Sugar and coffee had both risen earlier in the day as a sustained advance in equity markets this week helped to ease some concerns about inflation. Coffee futures retained gains with May arabicas on ICE up 0.80 cents to $1.1750 per lb and May robustas in London $5 firmer at $1,574 a tonne.
Dealers said the arabica market was underpinned by tight supplies following a decline in production in Colombia. Cocoa futures were mixed with May cocoa in London 11 pounds lower at 1,879 pounds a tonne but May cocoa on ICE unchanged at $2,586 a tonne. Cocoa prices in Ivory Coasts growing regions rose last week ahead of next weeks opening of the April-September mid crop harvest, farmers and exporters said on Thursday.
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