Sugar futures on ICE rallied nearly 4 percent on Wednesday, buoyed by the stronger currency in top grower Brazil and the rising premium of whites over raws, indicating physical demand. Coffee and cocoa futures were also firm as the 19-commodity Thomson Reuters CoreCommodity Index rose for the second straight day, recovering from the lowest level since 2009.
A recovery in the Brazilian real supported raw sugar and coffee prices, though the currency remained near 12-year lows. "The real recovered last night and some of that was priced into sugar at the opening," said James Kirkup, head of sugar brokerage at ABN Amro. "I think we're seeing technical short-covering today." Also supportive was the rallying premium of the spot white sugar contract over the spot raw contract, which rose as high as $105.87 per tonne, a one-month high. "The differential has definitely blown up on the whites over the raws," said Ben Ross, co-portfolio manager for Cohen & Steers' commodity fund.
Traders said this indicated more demand than previously expected. October raw sugar settled up 0.29 cent, or 2.6 percent, at 11.46 cents a lb, having soared 3.9 percent to 11.61 cents after buy-stops above 11.40 cents per lb were triggered, traders said. An El Nino weather pattern damaging sugar crops may mean global demand will outstrip production to a greater extent than expected in the upcoming season, hastening a rebound in prices from a 6-1/2 year low hit last month.
October white sugar jumped $7.90, or 2.3 percent, at $357.20 per tonne. Arabica coffee futures also gained ground, supported by the currency in Brazil, the world's biggest coffee grower, though prices remained near the 1-1/2-year low reached on Monday. September arabica ended up 1.9 cent, or 1.6 percent, at $1.2215 per lb. In robusta coffee, traders focused on a large front-month spread premium before the July contract expires on Friday.
September robusta finished up $12, or 0.7 percent, at $1,638 a tonne, trading near Tuesday's two-month low of $1,624. September New York cocoa closed up $13, or 0.4 percent, at $3,217 a tonne, while September London cocoa ended up 5 pounds, or 0.2 percent, at 2,139 pounds a tonne.