Raw sugar down but above 3-week low, cocoa mixed

ICE raw sugar futures inched lower on Thursday, hovering above a three-week low on pressure from fast progress in Brazil’s harvest and surplus supplies, while cocoa was mixed as dealers focused on the narrow ICE March/December spread.

Coffee futures inched higher in thin dealings.

March sugar futures closed down 0.15 cent, or 0.8 percent, at 19.53 cents a lb, just up from Wednesday’s three-week low of 19.45 cents.

Dealers noted that the large number of mills still open for crushing in Brazil should aid sugar production for the tail end of the crop, assuming the weather remains favorable.

Brazil’s production accelerated in October, but rains that have already hit the main center-south growing region are set to make work difficult for mills in the coming weeks, cane industry association Unica said on Wednesday.

December white sugar on Liffe settled down $1.90, or 0.3 percent, at $543.80 per tonne.

Weak demand on the physical market also pressured sugar prices.

“Demand is not really showing, which is why the futures market is edging lower,” said James Kirkup, director of sugar brokerage at ABN Amro in London. “It looks like the market will trade sideways to down, as opposed to sideways to up, in the coming weeks.”

Dealers said that surplus sugar supplies and lower prices could trigger the channelling of more cane into ethanol production.

“An ample supply of sugar on the market, and the resulting drop in prices, makes ethanol production more attractive,” Commerzbank said in a daily commodities note.

“The price of sugar will therefore probably not remain … below 20 cents per pound for long. There is no sign yet, though, of demand picking up much in response to lower prices.”

Cocoa prices were mixed but on ICE, volume was heavy with the focus on the December/March spread, earlier than usual, and ahead of the index roll scheduled for early November.

ICE December cocoa settled up $3, or 0.1 percent, at $2,402 per tonne, digesting losses after tumbling more than 4 percent the previous session, when sell stops were triggered by technical selling.

The contract traded on both sides of its 100-day moving average at $2,389 per tonne.

“There’s definitely been a fair amount of Dec/March switching. You’re probably seeing some trade-type buying of it,” one U.S. dealer said. “They seem to be impatient on it, not waiting for the index rolls.”

The December/March spread closed at $10 per tonne, narrowing in from $14 on Wednesday.

“It’s a three-month switch and it should be wider, and the fact that it’s narrow, it makes people nervous,” the U.S. dealer said.

Liffe March cocoa futures finished down 5 pounds at 1,554 pounds per tonne, finding support just above the 200-day moving average at 1,535 pounds per tonne.

The Liffe December/March spread continued to hold a small premium, and settled at 2 pounds, from 4 pounds the previous session.

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