October 25th, 2012

Sugar futures climbed for a second day in New York on speculation lower prices will start to attract demand just as competition for raw material sugar cane in top grower Brazil may increase next year. Arabica coffee rose.

Sugar has fallen 15 percent this year as supplies are set to outpace demand for a third season in 2012-13. Competition for raw material sugar cane in Brazil could soon increase as the government may raise next year the mandatory blend of ethanol into gasoline back to 25 percent from 20 percent now, ABN Amro Bank NV said in a quarterly report e-mailed today. Sugar and the biofuel are both made from the same raw material in Brazil.

“As a result, approximately 20 million tons of sugar cane would be needed extra for the production of ethanol,” Hans van Cleef, an analyst at the Dutch bank, wrote in the report. A rise in ethanol output will limit downside to sugar prices, he said.

Raw sugar for March delivery was up 0.8 percent to 19.83 cents a pound by 7:28 a.m. on ICE Futures U.S. in New York. White, or refined, sugar for March delivery rose 0.6 percent to $534.10 a metric ton on NYSE Liffe in London.

The global sugar surplus will be 6 million tons in 2012-13, following excess supplies of 8 million tons in 2011-12, Julio Borges, director at JOB Economia & Planejamento, said at a conference in London last week. Ethanol production in Brazil may rise by 30 percent in the 2013-14 season, he said.

Lower prices may be spurring demand. India, the world’s second-largest producer and biggest consumer, will import 500,000 tons of sugar in 2012-13, according to the Foreign Agricultural Service unit of the U.S. Department of Agriculture.
Shipping Sweetener

Vessels scheduled to leave Brazil’s main ports as of yesterday would take 131,700 tons of sugar to India and 125,600 tons to Indonesia, data from Williams Servicos Maritimos Ltda. showed. Indonesia will overtake China as the world’s biggest importer of the raw variety in 2012-13, Tom McNeill, a director at Brisbane, Australia-based Green Pool Commodity Specialists Pty, said in London last week.

Arabica coffee for December delivery rose 0.5 percent to $1.6055 a pound on ICE. Robusta coffee for January delivery was unchanged at $2,057 a ton on NYSE Liffe.

Cocoa futures for December delivery was up 0.4 percent to $2,409 a ton in New York. Cocoa for March delivery fell 0.3 percent to 1,555 pounds ($2,509) a ton in London.

- Isis Almeida in London at Bloomberg.