Raw sugar futures rose on Monday, boosted by investor buying, resuming its upward trend after last week's pullback as the market waited to see if the setback would stir demand in the physical market, dealers said.
Cocoa futures in London fell to a new five-month low as a bearish demand outlook continued to weigh on the market while coffee edged up, underpinned by reduced supplies from Colombia. July raw sugar on ICE climbed 0.53 cent to 15.48 cents a lb by 1435 GMT. The contract rose to 16.03 cents last week before prices fell back as physical buyers backed away.
Dealers said the outcome of a tender by Pakistan for 50,000 tonnes of white sugar was keenly awaited. "I think it will show if the market has corrected enough to generate offtake or if we are still some way from connecting with underlying physical demand," one dealer said.
Dealers said the strength of the rupee following India's election was also supportive for sugar, making imports less expensive in local currency terms. "Indian millers may sign more import deals anticipating strong currency," an analyst with a Delhi-based commodity brokerage said. India is the world's largest consumer of sugar.
Barclays Capital analyst Nicholas Snowdon said the sugar market was underpinned by the prospect of further Indian imports while in top producer Brazil the balance between sugar and ethanol may eventually move back towards the latter.
"We still believe there is strong support for prices, and with a high probability that certain factors will turn more supportive as the year progresses...the sugar story has far from turned sour," he said in a report on Monday. August whites rose $7.90 to $436.90 a tonne.
Cocoa futures eased on investor selling with prices in London setting a new five-month low. September fell 18 pounds to 1,600 pounds a tonne after touching 1,582 pounds, the lowest price for the second month since mid-December 2008.
Dealers said the market's downtrend had initially been driven by concern about weakening demand and had been given added momentum by technical selling with bearish chart formations developing as key support levels were breached. July cocoa on ICE fell $13 to $2,325 a tonne.
Arabica coffee prices were higher with the market edging back up after slipping back late last week from a 7-1/2 month peak set on May 12. Dealers said the market was supported by falling inventories driven partly by a drop in the availability of supplies from Colombia and Central America.
"The current development of ICE inventories underlines current shortages in the coffee market," Commerzbank said in a report on Monday, adding coffee stocks had fallen to the lowest level since March 2007. July rose 1.10 cents to $1.2890 per lb as it moved up towards last week's high of $1.3075. Robusta coffee futures in London were also higher with July up $15 at $1,525 a tonne.
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