Sugar, cocoa and coffee advanced in New York trading after the Federal Reserve said it will keep bond purchases to stimulate economic growth in the U.S., sending raw materials into a rally.
Policy makers want to see more evidence that improvement in the U.S. economy will be sustained before adjusting the Fed’s $85 billion in monthly debt purchases, the central bank said yesterday. Analysts surveyed by Bloomberg had predicted a $5 billion reduction of quantitative easing, as the stimulus is known. The Standard & Poor’s GSCI gauge of 24 raw materials advanced 0.9 percent after rallying 1.5 percent yesterday.
“The Fed’s action took most by surprise,” Jonathan Bouchet, a trader at Boman Capital SA in Geneva, said by e-mail today. “Consumption of raw materials could slowly increase seeing central banks all over the world acting as such. You could definitely see a rebound in the whole commodity space.”
Cocoa for December delivery gained 0.3 percent to $2,630 a metric ton by 5:48 a.m. on ICE Futures U.S. in New York. The price reached $2,657 earlier, the highest since Sept. 14, 2012.
Raw sugar for delivery in March rose 0.9 percent to 17.64 cents a pound, after touching 17.66 cents a pound, the highest in almost a week, and arabica coffee for December delivery advanced 1.2 percent to $1.1625 a pound.
While sugar and coffee futures in New York declined 9.6 percent and 19 percent respectively this year as supplies outpace demand, shortages of cocoa sent prices up 18 percent. Cocoa supplies will trail demand by 173,000 tons in the 12 months starting Oct. 1, estimates Macquarie Group Ltd., Australia’s biggest investment bank. The beans used to make chocolate are the second-best performer in the GSCI gauge, after crude.
The “Fed held off, so the initial reaction was a bounce in stocks, bonds and commodities,” Michael McDougall, head of the Brazil desk at brokerage Newedge Group in New York and who deals mostly in sugar, said by e-mail yesterday. “How long before the markets begin to worry why there was no taper?”
The Brazilian real, down 6.2 percent this year, rallied as much as 3.3 percent yesterday, reducing the incentive for producers in the world’s biggest sugar and coffee exporter to sell their commodities priced in U.S. dollars.
“The real picked up hard on the Fed news as well as other currencies against the dollar,” Boman’s Bouchet said. “That could also be helping sugar and coffee.”
In London, robusta coffee for delivery in November advanced 1.1 percent to $1,699 a ton on NYSE Liffe, while white sugar for December delivery rose 0.7 percent to $484.40 a ton. Cocoa for delivery in the same month fell 0.2 percent to 1,709 pounds ($2,745) a ton.
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