Arabica coffee on ICE Futures U.S. climbed to a 16-month high while raw sugar rallied to a three-month peak. Both commodities were driven higher on continued concerns about weather-related crop damage in top grower Brazil. Among precious metals, platinum group metals remain largely unresponsive so far to South Africa’s platinum miners’ strike which is now in its sixth week.
Arabic coffee futures continued their rally, driven by worries over crop damage wrought by drought conditions in some of Brazil’s biggest coffee-growing regions. Rain is finally returning to the main coffee-growing areas in the Center-South, but the extent of the crop damage already sustained will only become fully evident at harvest, analysts said.
May Arabica futures on New York’s ICE Futures U.S. exchange hit 179.38 cents a pound on Feb. 25, the highest for the most-active contract since October 2012. ICE May subsequently settled the day at 176.45 cents, 1.07 cents up. The following day, May arabica once again came within a whisker of the previous day’s high before settking at $177.70 cents a pound. Arabica now is more than 60 percent up on where it opened the year.
“The impact on yields of the low rainfall/hot temperatures weather combination observed in December-February is still as yet unclear,” Sydney-headquartered Macquarie Group said in an Agri-view note on the coffee rally. “But the market is clearly pricing in the worst case scenario.”
The bank noted this particular weather combination has never happened before during the critical cherry-growing stage.
There is a huge lack of consensus on what the final Brazilian coffee crop will be, with estimates ranging from as low at 50 million 60-kg bags to above 60 million. Macquarie currently “tentatively “ puts the 2014/15 crop at 53 million 60-kg bags against what it said could have been a 56-58 million bag crop. It warned that if rains fail to come in force, the Brazilian crop could end up below 50 million bags, in which case the market would enter a deficit.
As with arabica coffee, raw sugar futures continue to be supported by worries about potential crop damage in Brazil’s Center-South, the country’s main sugar-growing region. Raw sugar for May delivery on the ICE U.S. futures exchange hit 18.01 cents a pound on Feb. 25, the highest for the second position contract in three months. May subsequently settled at 17.70 cents, three cents up on the day. By midweek, sugar’s upward momentum had faltered a tad, with May closing at.17.68 cents.
Copersucar, the world’s largest sugar and ethanol trader, on Feb. 24 cut its sugar cane crop estimate for the Center-South in the 2014/15 season, which starts in April, to 570 million tonnes from 610 million tonnes as a result of the drought conditions. Netherlands-headquartered Rabobank currently is forecasting a harvest of 595 million tonnes while Macquarie is projecting 585 million tonnes, compared with the 596 million tonnes expected for this season.
However, while the Brazilian drought is providing some short-term support for prices, the historically high stocks-to-consumption ratio will contain prices within a narrow trading range in 2014, according to Rabobank.
PGM prices still unmoved by strike
In its latest February Agri Commodities Monthly report, the bank noted that that the Indian export subsidy for up to 4 million tonnes of raw sugar in the current season – finally agreed by the Indian government earlier this month – could increase the exportable supplies of sugar and weigh on prices throughout 2014.
The London-based International Sugar Organization (ISO), whilst this month reducing its global statistical surplus from its last estimate in November, also believes the global fundamentals provide little support for sugar market values during the remaining seven months of the 2013/14 season.
“Even if and when the world sugar economy enters a deficit phase,” ISO said in its latest Quarterly Market Outlook published Feb. 21, “a possible price recovery might be muted by the huge stocks accumulated since the beginning of the surplus phase in 2010/11.”
The sugar body cut its estimate of the 2013/14 world sugar surplus to 4.213 million tonnes from the 4.730 million tonnes estimate in November.
World production this season is expected to reduce for the first time since 2008/09 but at an estimated 181.347 million tonnes is still the second largest in history, ISO said. World sugar consumption is expected to grow 2.32 percent in 2013/14 to reach 177.134 million tonnes.
Meanwhile, refined, or white, sugar futures on London’s NYSE Liffe exchange edged higher. The Liffe May contract touched $483.50 a tonne on Feb. 25 before settling at $476.80, a gain of around 12 percent since the start of the month.
U.S. cotton futures hit a six-month high early this week, pushing above 90 cents a pound. The upward move came as worries about tight supplies of the fiber were reinforced again amid an absence of physical delivery against the front-month contract – currently March – on New York’s ICE Futures U.S. exchange. The March contract is due to expire on Mar.7.
The most-active May cotton contract on ICE climbed to 90.44 cents on Feb. 24, the highest for a second position contract since late August, before settling at 89.30 cents. By midweek, May ICE cotton settled 2.93 cents lower at 87.37 cents a pound.
Cotton output in the U.S., the world’s top cotton exporter, will set a four-year low this season, with the county’s inventory levels expected to remain tight due to lower production.
On account of lower production in China, Australia and Pakistan, the U.S. Department of Agriculture (USDA) earlier this month lowered its projections of world cotton ending stocks for the current crop year ending July 31, 2014, to 96.47 million bales, down from its January estimate of 97.61 million.
