Sugar ends higher, coffee falls amid euro crisis

ICE sugar futures reversed early losses to settle higher for the fourth straight day yesterday due to fund buying, while coffee fell as Europe’s debt crisis pushed the euro to a two-month low against the dollar and as investors worried about conflict in Korea. Cocoa futures settled stronger as the London market led the way up, ahead of the second round of presidential elections in top grower Ivory Coast. Volume was thin after the US Thanksgiving holiday on Thursday and the ICE agricultural markets dealt in a slightly abbreviated session.

ICE raw sugar futures found strength in follow-through buying from Wednesday as demand continued to be viewed as strong, particularly in China, dealers said. “This China (situation) where they seem to be running out of most everything, seems to be supporting the market,” said Jack Scoville, analyst for brokers The Price Group in Chicago.

ICE March raw sugar rose 0.30 cent or 1.1 per cent to end at 28.25 cents a lb, closing the week up eight per cent. Volume was light at around 36,305 lots, down nearly half from Friday after Thanksgiving in 2009.

Liffe March white sugar finished up $1.10 at $718.40 a tonne. “The algorithmic traders (system funds) are the likely buyers. There are few traders from the trade houses around due to yesterday’s Thanksgiving,” a sugar futures broker said. Dealers said the market faced stiff resistance above 30 cents a lb, having touched a 30-year high of 33.39 cents a lb on November 11, underpinned by low global stock levels.

“Concerns that total sugar recovery levels will fall in India’s cane are leading to fears that the country may not have the necessary surplus required to lift exports to a world that is crying out for more sugar,” Macquarie Bank said in a report. The European Commission has delayed plans to export a further 350,000 tonnes of out-of-quota sugar, after European Union governments raised concerns over the impact of the move on market prices, EU sources said.

Dealers said the softs had disconnected from market fundamentals due to an uncertain outlook for the euro and the threat of fresh hostilities on the Korean peninsula. “The recent bailout of Ireland was like putting a plaster on a wooden leg — we’re not getting to the core of the euro zone debt problem,” said Pierre Sebag of London-based sugar consultancy Sugar K.

A newspaper reported that euro zone nations were pressuring Portugal to follow Ireland’s lead and seek a bailout. Portugal and Germany’s finance ministry denied the report. Coffee futures settled lower along with the commodity complex, with investors still concerned about contagion stemming from the euro zone’s debt problems. ICE March arabica coffee futures dropped 4.75 cents or 2.3 per cent to finish at $2.0270 a lb, closing the week down four per cent, the biggest weekly loss since August 8.