Sugar pares gains, arabica at 1-1/2-year low

Raw sugar futures on ICE pared gains in heavy volume on Wednesday, as the currency in top grower Brazil tumbled, attracting producer and fund selling, while the weak real helped push arabica coffee to a 1-1/2-year low. Cocoa futures fell along with larger commodity markets as the strong US dollar added pressure. The 19-market Thomson Reuters CoreCommodity Index fell as much as 1.7 percent. Raw sugar prices initially rallied 3.5 percent but fell well below the session highs as the Brazilian real fell to the lowest price against the US dollar in more than 12 years.
October raw sugar settled up 0.02 cent, or 0.2 percent, at 10.73 cents per pound. "There was some trade buying initially and then the real dropped to new 12-year lows, and origin selling and fund selling came in," said Michael McDougall, director of commodities for Societe Generale in New York. Tracey Allen, senior commodities analyst with Rabobank, said she expected a further weakening of the real in the coming months, potentially adding further pressure on sugar prices, which hit a seven-year low last week on abundant stocks.
A weak real boosts the incentive for Brazilian producer sales of raw sugar and arabica coffee because it maximises local currency returns. "We are expecting another bearish Unica (Brazil cane crop) report some time this week and weather in center-south Brazil continues to be favourable for crushing for the first fortnight in September," said Nick Penney, a senior trader with Sucden Financial Sugar. October white sugar settled up $1.70, or 0.5 percent, at $338 per tonne. The contract remained at a discount to the December contract, after falling to a discount of $4.90 on Tuesday, its biggest since mid-June.
Benchmark arabica prices extended losses after sell-stops were triggered below $1.2025, the prior contract low and around the psychological support level of $1.20, with traders noting that speculators are not interested in buying the market back up. December arabica settled down 2.45 cent, or 2 percent, at $118.35 per pound, after tapping a 1-1/2-year low at $1.1815. November robusta coffee settled down $22, or 1.4 percent, at $1,581 per tonne, after hitting a contract low of $1,579 per tonne. December New York cocoa settled down $24, or 0.8 percent, at $3,117 per tonne, while December London cocoa closed down 14 pounds, or 0.7 percent, at 2,112 pounds per tonne.