Sugar Falls as Traders Take Profit on Rain Return; Coffee Slides

(Bloomberg) – Sugar fell for the first time this week in New York as traders took profits before the return of rains to growing areas of leading producer Brazil, where dryness threatens to cut this year’s crop. Coffee slid.

Futures advanced 12 percent in February, heading for the biggest monthly gain since July 2011. Dry weather in Brazil’s center south, the main growing area, will mean a crop of 570 million metric tons from an earlier estimate of 610 million tons, says Copersucar SA. Rain will return to cane areas of Sao Paulo and Parana tomorrow, MDA Weather Services forecast. Prices rose above 18 cents a pound yesterday for the first time since since November, before ending the day unchanged.

Prices broke through a technical indicator and the 18 cents level “before profit taking took hold of the market,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a report e-mailed yesterday. Fundamentals “do not necessarily warrant that much of a rise so quickly.”

Raw sugar for delivery in May slid 1.8 percent to 17.37 cents a pound by 6:41 a.m. on ICE Futures U.S. in New York. It dropped as much as 2 percent to 17.32 cents earlier. Futures trading volumes were more than double the average for the past 100 days for this time of day, according to data compiled by Bloomberg. White, or refined, sugar for delivery in the same month slid 1.3 percent to $470.40 a ton on NYSE Liffe in London.

Rain will start falling tomorrow in Parana and Sao Paulo state, MDA in Gaithersburg, Maryland, said in a report e-mailed yesterday. The states together account for about 70 percent of the center south’s production. Heavier amounts are forecast for Sao Paulo over the next six to 10 days, MDA said.

Easing Dryness

“Rain over the next 10 days, especially this weekend and next week, should ease much of the dryness across Sao Paulo and Parana, significantly improving conditions for cane growth,” MDA said. “Some minor improvement will even be possible in southern Minas Gerais next week.”

Sugar prices fell in the past three years, the longest slump in more than two decades, as global supplies outpaced demand. Forecasts for the 2014-15 season starting in October in most countries vary from Macquarie Group Ltd.’s shortage of 1.2 million tons and Datagro Ltd.’s deficit of 1.6 million tons to Kingsman SA’s estimate for a surplus of 2.1 million tons and Sucden Asia’s excess supplies of as much as 6.9 million tons.

Cocoa for delivery in May fell 0.6 percent to $2,903 a ton in New York. Cocoa for delivery in the same month slid 0.6 percent to 1,810 pounds ($3,021) a ton in London.

Rains will develop across southern Ghana today and spread over West Africa’s cocoa belt late this week and over the weekend, MDA forecasts. That will keep soil moisture “plentiful” for the development of the mid-crop, the smaller of two annual harvests that starts in about April in leading producer Ivory Coast. Ghana is the second-biggest grower.

Coffee Drops

Arabica coffee for May delivery fell 0.7 percent to $1.75 a pound on ICE. Robusta coffee for the same month delivery retreated 0.8 percent to $2,000 a ton on NYSE Liffe.

A cold front in the second half of this week will bring widespread rain to most of Brazil’s coffee areas, forecaster Somar Meteorologia said today in e-mailed report.

Significant rains will fall over coffee areas from Parana to central and southern Minas Gerais, and rain will cover much of southeast Brazil March 3-7, the forecaster said. The South American country is the world’s top coffee producer.