Soft commodity futures rallied in sympathy with a rebound in global markets aided by a weakening dollar on Thursday, and sugar was underpinned by a huge Malaysian deal, dealers said. "The (Malaysian) business has lifted the floor a bit," said James Kirkup, senior sugar broker with Fortis Commodity Derivatives.
European dealers talked of a Malaysian purchase of 2.7 million tonnes of bulk raw sugar on Thursday under a 3-year contract involving five trade houses at around $386 per tonne, cost and freight. There was no immediate confirmation from Malaysian authorities. Soft commodity dealers said dollar weakness was a major trigger for the surge of commodity prices, including coffee, cocoa and sugar.
"There is a weakening of the dollar today and a resurgence of the commodities complex," one softs trader said. The dollar dropped to a two-week low against the euro on Thursday, as central bank action to ease money market stress prompted investors to wade back into riskier trades.
The cost of borrowing dollars short-term fell and world stocks rallied after central banks unveiled concerted action to free up money markets jammed by banking sector strife. Much of the hedging against the Malaysian sugar deal was believed to have been done, but some hedging appeared to be taking place on Thursday afternoon.
ICE March raw sugar futures were up 0.09 cent or 0.7 percent to 14.01 cents a lb at 1455 GMT, while London December white sugar was up $3.8 or one percent to $383.20. Like sugar, cocoa and coffee futures rose on the back of the weaker dollar. Dollar-denominated commodities are cheaper in terms of other currencies when the dollar falls.
ICE December cocoa was up $123 or 4.8 percent to $2,670 a tonne at 1457 GMT, while London March cocoa was up 50 pounds or 3.4 percent to 1,530 pounds a tonne. ICE December arabicas were up 0.55 cent or 0.4 percent to $1.3345 a lb, while London November robustas were up $18 or 0.9 percent to $2,095 a tonne.