Sugar Tumbles as Fund Buying Fails to Spur Rally; Cocoa Retreats

Raw sugar fell to the lowest level in almost two weeks in New York as fund buying failed to spur a rally in futures prices. Cocoa and arabica coffee retreated.

Large and small speculators excluding index funds reduced bets on lower sugar prices by 64 percent in the week ended Aug. 13, according to U.S. Commodity Futures Trading Commission data compiled by Bloomberg. Prices gained 4.2 percent, or 0.7 cents a pound, in the period. This means that for every 0.01 cent a pound that the market rose, funds had to buy more than 36,000 metric tons of sugar, Arnaldo Luiz Correa, a director at Sao Paulo-based Archer Consulting, said in a report e-mailed on Aug. 17.

“The fact that these funds bought back so much between Aug. 6 and Aug. 13, and failed to push the market through its next level is obviously bearish as to reinstate their shorts,” Robin Shaw, an analyst at London-based futures and options broker Marex Spectron Group, said in a report e-mailed today.

Raw sugar for delivery in October slid 1.1 percent to 16.75 cents a pound by 5:40 a.m. on ICE Futures U.S. in New York. The price fell to 16.70 cents a pound, the lowest for a most-active contract since Aug. 7. White sugar for October delivery fell 0.6 percent to $500.10 a ton on NYSE Liffe in London.

The net-short position, or bets on lower prices, held by large and small speculators excluding index funds amounted to 28,270 contracts as of Aug. 13, data from the Washington-based commission showed. That compares with a net short of 78,724 contracts a week earlier. Sugar climbed in the four weeks ended Aug. 9 before declining last week.

Currency Factors

A weaker Brazilian real and a lower Indian rupee are prompting producers in the world’s top growers to increase exports, according to Marex Spectron. Sugar prices are now above ethanol in Brazil, meaning millers there will switch to making more of the sweetener at the expense of the biofuel, Shaw said. A weaker currency has also meant Brazilian millers are making the most in reais since December 2012, says Archer Consulting.

“There’s no doubt that the weakness of the real has contributed to millers that still have sugar sold and not hedged taking the opportunity of favorable prices in reais to place their sales orders of New York futures,” Correa said.

Cocoa for December delivery slipped 0.6 percent to $2,479 a ton in New York. Cocoa for December delivery fell 0.7 percent to 1,638 pounds ($2,566) a ton in London.

Arabica coffee for December delivery retreated 0.5 percent to $1.2305 a pound on ICE. Robusta coffee for delivery in November was 0.7 percent lower at $1,888 a ton on NYSE Liffe.

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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