Sugar Falls as Delivery Seen Showing ‘Dire’ Demand; Coffee Rises

(Bloomberg) – Sugar fell for a second day in New York as a smaller delivery than last year against the expired March futures may signal slowing demand. Coffee advanced.

Raw sugar delivered to settle the March futures expiration may be 341 contracts, estimates Newedge Group in New York. That compares with 3,007 lots a year earlier. ICE Futures U.S. will publish the delivery today. Raw sugar for March expired at a 1.19 cent-a-pound discount to May futures, a record since that spread started trading in 2011. Lower prices for earlier deliveries, or contango, may signal ample supplies.

“Prompt raw-sugar futures took a beating on expiry, reflecting the unloved nature of the products mooted for delivery,” Tom McNeill, a director at Brisbane, Australia-based researcher Green Pool Commodity Specialists, said in a report e-mailed today. “Demand is described by traders as ‘dire.’”

Raw sugar for delivery in May slid 0.8 percent to 17.51 cents a pound by 4:52 a.m. on ICE Futures U.S. in New York. Trading volumes were almost triple the average for the past 100 days for this time of day, data compiled by Bloomberg showed. White, or refined, sugar for the same delivery month fell 0.7 percent to $472.80 a metric ton on NYSE Liffe in London.

Sugar rallied in the past five weeks on speculation dry weather in leading producer Brazil will cut this year’s cane crop. Millers in Brazil’s main growing region will process 570 million tons of cane in the 2014-15 season starting in about April, says Copersucar SA, a producers’ cooperative with 47 associate factories. That’s down from a previous forecast of 610 million tons.

Fund Switching

“The sharp rally in the last week had more to do with speculators and fund switch from short to long than it did with any market shortage,” McNeill said.

Large and small speculators excluding index funds turned bullish on sugar in the week ended Feb. 25, according to U.S. Commodity Futures Trading Commission data compiled by Bloomberg. They were net-long by 12,045 futures and options after being net-short by 42,635 contracts a week earlier.

Raw sugar from Brazil for April shipment was trading at a 0.1 cent-a-pound discount to March futures last week, according to Green Pool. That made buying of sweetener outside the exchange more attractive. The sugar delivered on ICE will probably come from El Salvador, according to James Cassidy, head of sugar trading at Newedge.

Arabica coffee for delivery in May rose 0.7 percent to $1.8155 a pound on ICE. Robusta coffee for the same delivery month was little changed at $2,044 a ton on NYSE Liffe.

Cocoa for delivery in May fell 1.1 percent to $2,923 a ton in New York. Cocoa for the same month delivery slid 0.9 percent to 1,827 pounds ($3,058) a ton in London.