(The Wall Street Journal) – Concerns over tighter supplies lifted raw-sugar and cocoa futures Tuesday, with the latter closing in on a one-year high.
Raw-sugar futures rose 1% to end at 17.18 cents a pound, the highest settlement since Aug. 15.
Prices were firmer but extended gains after an industry group in top producer Brazil reported in mid-session trade that mills’ output of the sweetener fell in the second half of August as international prices sagged.
Mills in Brazil’s main sugar-cane growing region produced 3.2 million metric tons of sugar in the second half of August, down 3.7% from same period a year ago, the Brazilian Sugarcane Industry Association said. Ethanol production from the region, however, increased 8.3% to 2.1 billion liters.
Raw-sugar prices had been trading near three-year lows, pushing sugar mills to boost ethanol production to try to increase revenue.
The sugar-ethanol production mix for the season through Sept. 1 was 44.4% sugar to 55.6% ethanol, compared with 49.2% for sugar and 50.8% for ethanol a year earlier, according to Unica’s data.
“Sugar was given a priority,” said Michael McDougall, a senior vice president at brokerage Newedge.
Cocoa prices came within a week of a one-year high as supplies tightened. Stockpiles of the beans monitored by the ICE exchange were at just over 4.5 million bags, the smallest number since March 25. Concerns over how dry weather will affect the size and quality of next season’s harvest in West Africa–the source of more than half of the world’s cocoa beans–has pushed up prices.
Cocoa for delivery in December ended 0.6% higher at $2,570 a ton, the highest settlement for the most-active contract since Sept. 17, 2012.
But the market could face a selloff as the October-September crop year approaches, said Sterling Smith, a futures specialist at Citigroup.
“There’s a little froth in the hot chocolate here,” said Mr. Smith.
Cotton for December delivery ended 1.2% higher at 84.47 cents a pound, the highest settlement since Aug. 26, after the U.S. Department of Agriculture reported that the U.S. crop was lagging behind last year’s pace.
Arabica-coffee futures for December slid 1.2% to end at $1.1665 a pound, the lowest settlement since Aug. 30. Frozen orange-juice concentrate for November dropped 0.3% in light volume to settle at $1.37 a pound.
