Sugar Falls on Speculation Prices Rose Too Far: Cocoa Up

Sugar fell in New York on speculation prices that rallied as much as 1.7 percent yesterday climbed too far as the harvest in top grower Brazil accelerates. Cocoa rose.

Sugar gained yesterday as commodities moved higher. The Standard & Poor’s GSCI (SPGSCI) index of 24 raw materials gained 1.9 percent yesterday, the most since Nov. 19. Harvesting in Brazil’s center south, the country’s main growing region, is accelerating after rains delayed the start of the season, according to Macquarie Group Ltd. The area will produce a record 35.5 million metric tons of sugar this year, industry group Unica estimates.

“New York sugar prices have come under renewed pressure as the center south Brazilian cane harvest is now fully under way,” Kona Haque, an analyst at Macquarie, Australia’s biggest investment bank, wrote in a report. “After a slow start, the dry weather currently forecast for May should see the harvest accelerate.”

Raw sugar for delivery in July fell as much as 0.8 percent to 17.46 cents a pound ICE Futures U.S. and was down 0.2 percent to 17.57 cents by 6:48 a.m. in New York. Futures trading volumes were 45 percent lower than the average for the past 100 days for this time of day, according to data compiled by Bloomberg. White, or refined, sugar for delivery in August fell 0.3 percent to $499.50 a ton on NYSE Liffe in London.

The accelerating harvest in Brazil is sending down prices for ethanol, which compete with sugar for raw material sugar cane, London-based Haque said in the report. The price of hydrous ethanol, the pure biofuel used in flex-fuel cars, has fallen to a sugar equivalent of 18.4 cents a pound from over 20 cents a pound in April, she said. That may reduce millers’ incentive to favor ethanol production over sugar.

Sugar Delivery

Cargill Inc., Bunge Ltd. and Wilmar International Ltd. took delivery this week of about 1.43 million tons of sugar in transactions to settle the expiration of the May raw futures contract in New York, the biggest amount in 24 years.

“A massive delivery against the expiry of the May futures contract should add to the bearish sentiment short term, as these volumes seek homes,” Haque said. “We continue to expect sugar to tread lower to 17 cents a pound in the short term.”

Arabica coffee futures for July delivery were little changed at $1.395 a pound on ICE. Robusta futures for delivery in July fell 0.2 percent to $2,017 a ton on NYSE Liffe.

Cocoa for July delivery rose 0.2 percent to $2,418 a ton in New York. Cocoa for July delivery rose 0.3 percent to 1,575 pounds ($2,451) a ton in London.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.

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