Sugar futures surged to contract highs on Friday as a reduced outlook for Brazilian production increased concern about nearby supply tightness, while hedge selling helped to trigger a dip in cocoa prices. Downward revisions to top sugar producer Brazil's crop size boosted prices.
The latest forecast came from Lausanne-based consultancy Kingsman SA, which sees sugar production in the key center-south region of Brazil in 2011/12 totalling 31.87 million tonnes.
The forecast is below Brazil's sugar industry group Unica's estimate of 32.4 million tonnes made last week. "People are getting very excited about the Brazil number," a London-based broker said, adding there was little selling at these levels to contain the move. October white sugar on Liffe were up $28.50 or 3.65 percent at $809.80 per tonne after earlier setting a contract high of $813.00.
Cocoa prices fell with hedge selling initially putting the market on the defensive and more broadly based long liquidation emerged as the decline gathered pace. Buyers were scarce.
"They were basically selling into a hole," one London dealer said, adding industry buyers remained about 15 to 20 pounds a tonne below current levels.
Liffe September cocoa traded down 57 pounds, or 2.9 percent, at 1,913 pounds a tonne.
Dealers said estimates for the 2010/11 global surplus also continued to be revised higher, the latest being 227,000 tonnes from ABN AMRO/VM Group.
The world market is expected to switch into a deficit of 93,000 tonnes in 2011/12 as West Africa's production falls, ABN AMRO/VM Group said.
Harvest in Brazil, the world's top coffee producer, also weighed on prices. "This off year in the Brazilian arabica cycle remains unusually strong, thanks to good uniform flowering early in the season and plentiful rainfall at the right time," ABN AMRO/VM Group said.
September robusta coffee on Liffe traded up $38 or 1.9 percent to $2,040 per tonne. The contract dipped to $1,985 on Thursday, its lowest level since December 2010.