Raw sugar futures on ICE rallied 6 percent on Thursday, its biggest surge in more than a year on weather concerns in top growers Brazil and India, and a flurry of late-day fund buying, while the white sugar premium fell to the lowest in six weeks. Arabica coffee futures turned higher, along with the 19-market Thomson Reuters CoreCommodity Index that rose as much as 1.9 percent, after falling to the lowest since January 2014.
Cocoa was little changed. Both sugar and coffee futures rose despite earlier weakness in the Brazilian real, which typically attracts fund and producer selling sales as the weak currency maximises local currency returns. October raw sugar settled up 0.61 cent, or 5.7 percent, at 11.34 cents per pound, after soaring to 11.39 cents, a five-week high, on heavy buying by funds around the settlement window. Total volume was more 2.5 times the average due to heavy October/March spreading, traders said.
The rally halted just above the 50-day moving average at 11.33 cents. "I think it is fear of rain hindering Brazil's harvest next week and fears of Indian production falling with dry weather," said Michael McDougall, director of commodities for Societe Generale in New York. Traders are increasingly paying attention to reports of a strong El Nino weather pattern, a possible factor behind wet weather expected during this month's cane harvesting in Brazil and a weak monsoon in India. McDougall added that forecasts for China's sugar output are shrinking, feeding expectations for increased demand from the world's second biggest economy. "In the short term perhaps we can attribute the strength in the price action as 'nervous' net spec short fund position short-covering," said Thomas Kujawa, co-head of the softs desk at Sucden Financial Sugar. October white sugar settled up $11.4, or 3.4 percent, at $349.40 per tonne. Its premium over raw sugar fell as low as $101.81 per tonne, the lowest since July 24, well below the two-year high above $122 on August 11.
December arabica settled up 1.2 cent, or 1 percent, at $1.1955 per pound, after touching a 1-1/2 year low of $1.1775. November robusta coffee settled up $9, or 0.6 percent, at $1,590 per tonne after hitting a contract low of $1,573. December New York cocoa settled down $3, or 0.1 percent, at $3,114 per tonne, while December London cocoa closed up 3 pounds, or 0.1 percent, at 2,115 pounds a tonne.
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