December 31st, 2012

Sugar futures rose in London to the highest price in almost four weeks on speculation demand for the refined variety exceeded estimates. Robusta coffee gained.

The premium commanded by white, or refined, sugar over raw sweetener climbed 5.4 percent in the past month, data compiled by Bloomberg showed. That may mean demand was underestimated, London-based broker Marex Spectron Group said in a report dated today. Sugar is down 13 percent in London and 16 percent in New York in 2012, heading for a second year of declines, as global supply is set to outpace demand for a third year in the 2012-13 season begun in October.

“The fact that the white premium is holding up at levels which enable tolling to take place, after six months when all tolling refiners have been working more or less at full capacity, and when India and Pakistan are unexpected sources of white exports, must mean that demand for high-quality white sugar has exceeded statistical forecasts,” said Paul Bannister, head of sugar brokerage at Marex Spectron. Tolling refers to imports of raw sugar for processing into white and re-export.

White sugar for delivery in March advanced 0.6 percent to $524.90 a metric ton, the highest since Dec. 4, by 11:04 a.m. on NYSE Liffe in London. Raw sugar for delivery in March rose 0.6 percent to 19.54 cents a pound on ICE Futures U.S. in New York.

Sugar output in India, the second-biggest producer, rose 2 percent from a year earlier to 4.9 million tons from Oct. 1 through Dec. 15, the Indian Sugar Mills Association said Dec. 18, fueling speculation the country may have enough to export. Pakistan allowed 400,000 tons of sugar exports, according to a Finance Ministry statement last month.

Sugar: Speculator Holdings

Large and small speculators excluding index funds reduced their net-short position, or bets on lower prices, in raw sugar to 58,621 ICE contracts in the week ended Dec. 24 from 62,668 lots a week earlier, according to U.S. Commodity Futures Trading Commission data. Index funds are likely to buy 30,000 lots in 2013’s second week due to changes in annual weightings in commodity indexes, Marex Spectron estimates.

“The stalemate continues,” Bannister said. “In the bearish trench is the big surplus. In the opposite trench is a rather motley crew, the large managed funds’ short position.”

Robusta coffee for delivery in March advanced 1.3 percent to $1,936 a ton in London, leaving prices up 7 percent this year. Arabica coffee for delivery in March, down 36 percent in 2012 in New York trading, fell 0.5 percent to $1.461 a pound.

Cocoa futures for delivery in March was unchanged at 1,438 pounds ($2,325) a ton on NYSE Liffe, for an annual gain of 4.2 percent. Cocoa for delivery in March added 0.3 percent to $2,256 a ton on ICE and was up 7 percent in 2012.

- Isis Almeida in London at Bloomberg.