U.S. Commodities: Sugar Plummets 10% on ‘Stop Loss’ Orders

Sugar futures plunged 10 percent as computerized trading triggered sales following an early slide spurred by bets that demand may ease on the heels of the rally in the second half of 2010.

“You had an initial movement that triggered a lot of stop losses,” or orders to sell when the price drops to a specified level, said Ricardo Scaff, a trader at Rabobank International in New York. “Some trading systems are automatic, and once they see the movement, they add to it.”

Companies are switching to substitute sweeteners because of high sugar prices, Michael McDougall, a senior vice president at Newedge USA, said this week in a report. Yesterday, futures dropped 1.6 percent.

In other markets, crude oil fell the most in a month after a U.S. government report showed a smaller-than-forecast drop in inventories. Copper rose. The UBS Bloomberg Constant Maturity Commodity Index declined 0.9 percent to 1,625.24.

Raw-sugar futures for March delivery slumped 3.45 cents to 30.38 cents a pound on ICE Futures U.S. in New York. The percentage drop was the biggest since Nov. 12. On that date, the commodity plunged 12 percent, the most since July 1988, as speculation that China would increase borrowing costs roiled commodity markets.

“A sell-off was expected at the end of the year,” said Mario Silveira, an analyst at FCStone Group Inc. in Campinas, Brazil. “No one thought it would be of this magnitude.”

Crude Oil

Crude-oil futures for February delivery fell $1.28, or 1.4 percent, to $89.84 a barrel on the New York Mercantile Exchange. It was the biggest decline since Nov. 30 and the first settlement below $90 since Dec. 21.

Petroleum supplies decreased 1.26 million barrels to 339.4 million in the seven days ended Dec. 24, the Energy Department said today. Stockpiles of distillate fuel, a category that includes heating oil and diesel, unexpectedly increased. Gasoline inventories dropped.

“Two out of the three headline numbers were bearish, and that’s what’s dominating the trade here,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Crude oil and heating oil are getting hit pretty hard in what had been thin trading conditions all week long.”

Copper

Copper climbed to a record after U.S. businesses expanded at the fastest pace in two decades and Chinese manufacturing expanded, signaling robust demand.

The Institute for Supply Management Chicago Inc. said today its business barometer rose to 68.6 this month, the highest level since July 1988. A purchasing managers’ index in China was 54.4 in December, according to HSBC Holdings Plc and Markit Economics. Figures over 50 signal expansion. China and the U.S. are the world’s biggest copper users.

“The trend is on for higher prices” as the economy accelerates and demand rises, said Richard Ilczyszyn, a senior market strategist at Lind-Waldock, a broker in Chicago. “It’s supply concerns that set up this whole bull run.”.

Copper futures for March delivery rose 5.1 cents, or 1.2 percent, to $4.3625 a pound on the Comex in New York. Earlier, the price jumped to an all-time high of $4.379.

Global inventories are down 19 percent this year, heading for the biggest annual decline since 2004, according to data compiled by Bloomberg.

Commodities settled as follows:

Precious metals: February gold down $7.60 to $1,405.90 an ounce March silver down 19.1 cents to $30.513 an ounce April platinum down $10.90 to $1,749.30 an ounce March palladium down $7.20 to $786.20 an ounce

Livestock: February live cattle down 0.925 cent to $1.07325 a pound March feeder cattle down 1.15 cents to $1.22925 a pound February lean hogs down 0.75 cent to 78.85 cents a pound February pork bellies up 0.25 cent to $1.065 a pound

Grains: March soybeans down 1 cent to $13.76 a bushel March corn down 8 cents to $6.16 a bushel March wheat down 14.5 cents to $7.8475 a bushel March oats up 3.25 cents to $3.8775 a bushel

Food and Fiber: March coffee down 3.35 cents to $2.363 a pound March cocoa down $65 to $3,000 a metric ton March cotton up 2.41 cents to $1.4284 a pound March sugar down 3.45 cents to 30.38 cents a pound March orange juice up 2.2 cents to $1.66 a pound

Energy: February crude oil down $1.28 to $89.84 a barrel February natural gas up 5.1 cents to $4.338 per million British thermal units January heating oil down 3.61 cents to $2.4854 a gallon January gasoline up 0.14 cent to $2.3918 a gallon

Others: March copper up 5.1 cents to $4.3625 a pound March lumber down $8.70 to $321 per 1,000 board feet

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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