Reversing last week’s brief uptick to near 16 cents a pound on Aug. 21, raw sugar for October on ICE Futures U.S. in New York touched a seven-month of 15.30 cents a pound on Aug. 25 before recovering to finish at 15.60 cents at midweek and some 0.04 cents below last week’s close.
Amid a market weighed down by a global glut of the sweetener, ICE raw sugar futures got a boost after Brazil’s sugarcane industry association, Unica, on Aug. 26 reduced its forecast for the country’s 2014-2015 Center-South cane crop. The industry body pegged output at 545.9 million tonnes, down 5.9 percent from its initial forecast of 580 million tonnes in April.
Unica said some states in the Center-South, which is Brazil’s main cane-growing region, had suffered excessive rain which had delayed harvesting, while others had been more badly affected by drought early in the year than previously had been thought. Cane yields already are about 10 percent lower than a year ago and Unica expects them to drop further as the harvest progresses.
However, sugar output in the Center-South so far this season still is 6.42 percent up on last year at 17.9 million tonnes through the first half of August, the association said.
Furthermore, the global sugar market is likely to see a fifth year of supply surplus this season, according to the London-based International Sugar Organization (ISO), which released its latest Quarterly Market Outlook this week. In its first estimates of the 2014-2015 season, starting Oct. 1, the ISO is forecasting a global production surplus of 1.306 million tonnes.
Despite the smaller supply surplus compared with the prior year’s 3.991 million tonnes, the sugar body warned that global fundamentals are unlikely to support a rise in market values from current values.
“Any possible price recovery brought by production shocks over the course of 2014-2015 might be muted by the huge stocks accumulated since the beginning of the surplus phase in 2010-2011,” the ISO said.
Four successive seasons when production has exceeded consumption already have driven up global stocks to 78.009 million tonnes as at the end of 2013-2014, according to the organisation’s data.
White, or refined, sugar on London’s NYSE LIffe finished at $426.15 a tonne, basis the October contract, $6.65 off the six-month low of $419.50 recorded on Aug. 19.
Arabica coffee rallies
Arabica coffee futures on ICE rallied this week as concerns about the size of the arabica coffee crop in top grower and exporter Brazil this season and next continued to stalk markets. Prolonged drought conditions in the country’s key coffee-growing regions in January and February have been expected to reduce output in 2014-2015 (Apr. 1-March 31) but there has been uncertainly over the extent of the damage. In recent weeks, worries have increased that 2015-2016 output will also be affected following cases of early blossoming of the country’s arabica coffee trees. The early flowering is attributed to the prolonged drought-induced stress experienced earlier this year.
A forecast by a leading German coffee trading company this week reinforced the fears that next year’s Brazilian arabica coffee crop will be impacted. Hamburg-based Neumann Kaffee Gruppe pegged the country’s coffee crop next season at 45 million 60-kg bags, some 2.7 million bags less than forecast for the current crop year’s at 47.7 million bags.
ICE December arabica coffee rallied 5.7 percent to touch $1.99 a pound following the German trading house’s forecast on Aug. 26, and briefly touched $2.0270 a pound the following day, a four-week high, before settling at $1.9815.
November robusta coffee futures on Liffe finished one percent higher on the day at $2,051 a tonne at midweek.
ICE cocoa futures reached their highest since May 2011, basis the second-month contract at midweek, with December touching $3,300 a tonne on Aug. 27, before settling sharply lower at $3,208. Liffe December cocoa finished at £2,024 a tonne, not far off last week’s three-year high of £2,050 a tonne.
ICE cocoa futures are up around 21 percent and Liffe futures some 17 percent so far this year as speculators bet on a global deficit in 2014-2015.
Gold bounces off two-month low
Gold bounced back a tad at midweek after falling to its lowest in two months last week amid receding investor demand as the U.S. dollar and global financial markets rally. Gold for December delivery on Comex settled at $1,283.40 an ounce on Aug. 27 after moving up to around $1,290 earlier in the day. December gold had slipped to $1,273.06 on Aug. 23, its lowest since mid-June. Analysts believe geopolitical concerns underpinned this week’s upward move, which came despite continued pressure from the firm U.S. dollar and stronger equity markets.
Geopolitical concerns certainly came to the fore again on Aug. 28, with reports circulating that Ukraine’s president Petro Poroshenko has accused Russia of sending troops across the border to support pro-Russian separatists fighting in eastern Ukraine. Russia has denied the move.
