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Sugar Falls on Speculation About Producer Sales; Cocoa Retreats

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June 17 (Bloomberg) -- Sugar fell in New York, erasing a gain, on speculation millers in leading producer Brazil will take advantage of a rally to boost sales. Cocoa dropped on concern top grower Ivory Coast may increase selling.

Sugar rose as much as 3.6 percent on June 14 as millers in Brazil used more cane to make ethanol in the second half of May, data from industry group showed. Prices also climbed after ethanol futures added as much as 2.4 percent a day earlier on the BM&F Bovespa, Brazil’s futures exchange. The South American nation will harvest a record cane crop this year.

“We are not too surprised at the rally, but would urge caution,” Nick Penney, a senior trader at brokerage Sucden Financial Ltd. in London, said in a report e-mailed today. “Producers have been waiting for such a move and are likely to sell into it, especially Brazilian producers who are benefiting from the weakness of the real against the dollar.”

Raw sugar for delivery in October lost 0.8 percent to 16.95 cents a pound by 8:41 a.m. on ICE Futures U.S. in New York after climbing as high as 17.24 cents, the highest since May 14. White, or refined, sugar for delivery in August rose 0.7 percent to $487.80 a metric ton on NYSE Liffe in London.

Millers in center south, Brazil’s main growing region, used 58 percent of all cane processed to make ethanol rather than sugar in May’s second half, data from Unica showed. That’s up from 52 percent a year earlier. Sugar production there will be a record 34.5 million tons in 2013-14, estimates Green Pool Commodity Specialists Pty, a researcher in Brisbane, Australia.

Bearish Wagers

Large and small speculators excluding index funds boosted their net-short position, or bets on lower prices, to a record 121,030 contracts in the week ended June 11, U.S. Commodity Futures Trading Commission data showed. Funds are “very short and once they start short-covering their buying may snowball,” researcher Kingsman SA, a unit of McGraw-Hill Financial Inc.’s Platts, said in a report e-mailed today.

Cocoa for delivery in September slid 1.5 percent to $2,220 a ton on ICE. Cocoa for delivery in July fell 1.4 percent to 1,444 pounds ($2,271) a ton on NYSE Liffe.

Ivory Coast will refund exporters and processors buying undersized beans from June 17 to July 31, industry regulator Le Conseil du Cafe-Cacao said June 14. It made the announcement after farmers said they were unable to sell supplies because dry weather left beans too small to meet minimum requirements. Growers are harvesting the smaller of the two annual crops that runs from April to September.

Arabica coffee for delivery in September fell 0.2 percent to $1.236 a pound on ICE. Robusta coffee for the same delivery month dropped 0.5 percent to $1,756 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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