Sugar Falls on World Surplus

(BusinessWeek) – Raw-sugar futures fell for the first time in three sessions on renewed concern that global output will exceed demand as exports expand from Brazil, the world’s biggest producer. Cocoa rose and coffee declined.

Sugar exports from Brazil are more profitable than sales in the domestic market after the real weakened against the dollar over the past three months, according to Cepea, a University of Sao Paulo research group. The advance in Brazil’s center south’s harvest “should weaken prices” as weak demand in the Northern Hemisphere “prompts a global trade surplus into the third quarter,” Hussein Allidina, Morgan Stanley’s head of commodities research, wrote in a report e-mailed today.

“The real is probably putting pressure on the market,” Michael K Smith, the president of T&K Futures and Options, said in a telephone interview from Port St. Lucie, Florida.

Raw sugar for July delivery declined 0.6 percent to 19.51 cents a pound at 1:08 p.m. on ICE Futures U.S. in New York, after rising 0.6 percent in the previous two sessions. Before today, the commodity tumbled 7.1 percent in May, heading for the third consecutive monthly drop and the longest slide since April 2011.

The Brazilian real touched a three-year low of 2.1062 per dollar on May 23.

“Of all soft commodities, sugar has the most bearish fundamentals right now,” Smith said. The sweetener “could fall another two to three cents from here,” especially if gasoline prices continue to drop, encouraging growers to “produce more food stuff,” rather than ethanol, he said.

Gasoline prices have plunged 9.2 percent this month on the New York Mercantile Exchange.

Cocoa futures for July delivery rose 0.3 percent to $2,116 a metric ton in New York.

Arabica-coffee futures for July delivery fell 0.4 percent to $1.6715 a pound on ICE.

In London futures trading, refined sugar, cocoa and robusta coffee also slid on NYSE Liffe.

To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net; Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editors responsible for this story: Steve Stroth at sstroth@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net