Raw sugar futures jumped to a two-month high on Monday, as speculators covered their short positions following a tax change in Brazil that will make ethanol more competitive there, potentially reducing availability of sugar from cane. Arabica coffee rose to its highest level in more than three months, while cocoa futures fell from their highest prices since mid-June.
October raw sugar settled up 0.54 cent, or 3.76 percent, at 14.91 cents per lb, after hitting 14.99 cents, the highest since June 1. The spot contract closed July up 9 percent, its strongest monthly performance since September. The Brazilian government reduced a federal ethanol tax on Friday, after the market closed, while maintaining higher diesel and gasoline rates.
The move will make ethanol more competitive, potentially prompting Brazilian producers to switch more of their output from sugar to ethanol, dealers said. "That should theoretically create some additional ethanol demand at the expense of sugar," said Jack Scoville, an analyst with Price Futures Group in Chicago.
Sugar prices broke resistance at levels ranging from 14.55 cents to 14.7 cents, creating additional buying, Scoville said. Sentiment was also boosted by a recent cut-back in the bearish stance held by speculators. October white sugar settled up $12.50, or 3.2 percent, at $402.30 per tonne, after rising to $404, its highest since June 12.
September arabica coffee extended last week's gains, settling up 1.4 cent, or 1 percent, at $1.3925 per lb, its highest for the spot contract since April 20. The spot contract closed the month up 12.3 percent, its strongest monthly gain in 13 months. "There's a little scaremongering about potential weather issues and concerns about the quality of the Brazil harvest," said Judith Ganes-Chase, president of J. Ganes Consulting.
September robusta coffee settled down $6, or 0.3 percent, at $2,123 per tonne. September New York cocoa closed unchanged at $2,060 per tonne, after touching $2,082, its highest since June 13. It closed July up 9.4 percent. Prices briefly extended gains from last week's technical rally of 4.7 percent.
Bean arrivals at ports in top grower Ivory Coast reached 25,000 tonnes between July 24-30, more than four times of that in the same period last season. September London cocoa settled down 5 pounds, or 0.3 percent, at 1,590 pounds per tonne, after rising to 1,606 pounds, the highest since June 19.
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