Sugar at One-Week High as Brazil Rains Hit Harvest; Cocoa Gains

Sugar climbed to a one week-high in New York as rains are set to disrupt harvesting this week in Brazil, the world’s largest producer, just as speculators’ bets on lower prices reach a record. Cocoa advanced.

Rains forecast this week will disrupt the sugar cane harvest in Brazil and help crop development, Sao Paulo-based weather forecaster Somar Meteorologia said yesterday. Investors increased their net-short position, or bets on lower prices, to a record in the week ended May 21, according to U.S. Commodity Futures Trading Commission data compiled by Bloomberg.

“Heavy rainfall is currently hampering the sugar cane harvest in Brazil,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report e-mailed today. “This should not pose any problem given the rapid progress made so far.”

Raw sugar for delivery in July rose 0.8 percent to 16.97 cents a pound by 6:05 a.m. on ICE Futures U.S. in New York, after rising as much as 17 cents a pound, the highest since May 20. White, or refined, sugar for delivery in August was up 0.8 percent to $480 a metric ton on NYSE Liffe in London. Raw sugar fell 3.6 percent this month.

Large and small speculators excluding index funds boosted their net-short position by 7.3 percent to 123,471 contracts, the Washington-based commission said in its Commitments of Traders report. Positions held by index funds do not reflect fundamentals of the sugar market as they “simply allocate a given percentage of whatever money is invested in them to buying sugar futures,” according to Marex Spectron Group.

Cane Processing

Industry group Unica will release figures for cane processing in Brazil’s center south, the country’s main growing region, for the first half of May later today. Cane processing in the area probably reached 37 million tons in the period, up from 21 million tons a year earlier, Jose Francisco Micheloni, a broker with ICAP do Brasil Ctvm, said on May 22.

“The rain is improving the prospects for the rest of the crop, as it will promote growth of the sugar cane,” Commerzbank’s Fritsch said. “Thus the prospects of a record-high sugar cane harvest remain intact.”

Arabica coffee futures for July delivery gained 0.5 percent to $1.2785 a pound on ICE. Robusta coffee futures for July delivery were 0.5 percent lower at $1,942 a ton on NYSE Liffe.

If the Brazilian government takes steps to support growers as recommended by the Agriculture Ministry and supplies are taken away from the market, then it could be good news for the bulls, Rodrigo Costa, a trading director at Caturra Coffee Corp., said in a report for Sao Paulo-based Archer Consulting, where he is a contributor. Otherwise everything points to New York prices testing $1.10 a pound, he said.

Cocoa for July delivery was up 0.3 percent to $2,252 a ton in New York. Cocoa for delivery in the same month climbed 0.5 at 1,529 pounds ($2,310) a ton in London.

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