Sugar Climbs to One-Month High on Trade Short Covering

(Reuters) – Raw sugar futures rose to a one-month peak on Monday with the market buoyed by trade short covering following its strong performance late last week while coffee and cocoa prices also edged higher.

Dealers said a strengthening in Brazil’s real currency to a one-year high may have acted as a catalyst for the rally which continued into its third session on Monday.

“The real’s recovery in the face of greenback strength is remarkable and forced the sugar market to pay attention,” said Commonwealth Bank of Australia analyst Tobin Gorey.

A stronger real makes sales less attractive in local currency terms in the world’s top producer of both sugar and coffee and is supportive for dollar prices of both commodities.

October raws were up 0.52 cent or 2.6 percent at 20.87 cents a lb at 1112 GMT after earlier rising to a one-month peak of 20.89 cents.

“The trade got short after the strong (Brazil) crushing numbers and people have been forced to cover. I think today’s move is additional short covering,” one dealer said.

The front month contract had traded at a five-week low of 18.71 cents in late July following strong crushing data from the key Centre-South region of Brazil.

Dealers said Brazil’s cane crush remained strong and should ensure adequate near-term sugar supplies despite widespread forecasts for global deficits in both the 2015/16 and 2016/17 seasons.

October whites rose $5.70 or 1.0 percent to $557.10 per tonne.

Arabica coffee futures were also higher with September up 1.75 cents or 1.2 percent at $1.4425 per lb.

Dealers noted Brazil’s coffee harvest was now well advanced with a large crop anticipated, limiting the upside for prices.

Robusta coffee futures derived less support from Brazil’s currency strength but were underpinned by slowing exports from top producer Vietnam.

Cocoa futures were slightly higher with September New York cocoa up 0.3 percent at $3,029 a tonne and September London rising 0.1 percent to 2,422 pounds a tonne.