Sugar, Coffee up as commodity gain

NEW YORK: Cocoa futures surged on Tuesday as they were swept up in a broad-based advance in world equity and commodity markets, with gains linked to stronger-than-expected economic data from China and Germany.

Sugar prices were firm, underpinned by diminishing crop prospects in top exporter Brazil and the prospect of Chinese demand. Coffee moved higher as well.

World stocks shot higher and the dollar fell as dismal US data spurred hopes the US Federal Reserve may offer more economic stimulus.

Cocoa led the charge with US futures boosted by technical buying after shooting up through the 200-day moving average around $3,106 per tonne.

It surpassed that level for the first time since July 22.

"You see some of these trend-following guys going long," said Nick Gentile, head of trading at Atlantic Capital Advisors.

New York's December cocoa contract soared $96, or 3.15 percent, to close at $3,141 per tonne, the highest settlement since July 21 and the biggest daily rise in six weeks.

In London December cocoa futures were up 43 pounds, or 2.24 percent, to end at 1,960 pounds a tonne.

Cocoa got a lift from the strong commodity complex, firm sterling against the dollar, and dealers turning their focus away from the present global surplus and onto next year's crop.

"It's more or less just technical follow-through buying," said Penson Futures analyst Bill Raffety.

Cocoa dealers said the market was increasingly looking at the prospect of a deficit in 2011-12 rather than the large global surplus in 2010-11.

"The deficit figures seem to be getting a little bit bigger for next year. Conditions haven't been that good in some of the growing regions in the past three or four weeks so you have to add a bit on (to deficit forecasts)," one dealer said.

A global surplus of about 300,000 tonnes is generally seen in 2010-11 while a drop in production could see the market swing to a deficit, possibly of more than 100,000 tonnes, in 2011-12.

Cargill expects world 2011-12 cocoa supplies to be adequate to meet demand, with the cushion of a sizable global surplus from the previous crop, the US agribusiness company said on Tuesday.

Another concern for the market is there is no cocoa coming out of Indonesia, the world's third biggest producer.

"Indonesian beans are not coming to the US," said Gentile.

Sugar futures firmed further, with support coming from news that the sugar crop in Brazil's key centre-south region was facing further downward revisions.

New York's October raw sugar futures rose 0.03 cent to close at 30.82 cents a lb. London's October white sugar contract added $2 to finish at $800.50 a tonne.

The prospect of demand from China was also supportive.

"Owing to a poor domestic crop in the key sugar-producing region of Guangxi, imports are likely to stay elevated over coming months as China faces a domestic shortfall," Barclays Capital said in a commodities note.

China has sold all the 200,000 tonnes of sugar from state reserves offered in the second auction this month, aiming to cover a deficit and cool record domestic sugar prices during the peak consuming season.

"A combination of a lower crop this year and next in Brazil and a heightened import program by China as a result of high internal prices and dwindling stocks to combat theses, would be a potent mixture indeed," brokers Sucden Financial said.

Coffee climbed, with arabica coffee futures briefly touching their highest since July 8 and remaining above the 100-day moving average around $2.691 per lb for the third straight day.

New York's December arabica coffee futures gained 3.25 cents to finish at $2.716 a lb. November robusta coffee on Liffe went up $51 to close at $2,396 per tonne.

Copyright Reuters, 2011