ICE raw sugar March futures dipped to a 2-1/2 year low on Thursday but then surged 3 percent on a short-covering flurry on short-lived talk that a Brazilian tax had been dropped, causing its discount to May to narrow just ahead of its expiration. Arabica coffee, which continued to face pressure from excess supplies, inched lower, defying a firm move for the Thomson Reuters-Jefferies CRB index. Cocoa futures rose on both ICE Futures US and Liffe.
Sugar futures soared on short-covering spurred by talk that the Brazilian government was thought to have eliminated a tax on ethanol, a product of sugar, which would have increased the value of ethanol relative to sugar, dealers said. March raws rose 0.54 cent, or 3 percent, to settle at 18.38 cents a lb, after earlier slipping to 17.61 cents, the lowest price for the front month since August 2010. The contract expired at the end of the session.
Dealers said lower sugar prices were helping uncover demand on the physical market. The most-active May contract also soared, rising 0.31 cent, or 1.7 percent, to close at 18.39 cents per lb, after climbing as high as 18.59 cents. Open interest on March fell around 45 percent overnight to 7,065 lots and the front month widened to a discount to May of 0.38 cent intraday. The day’s market surge then caused the spread to narrow sharply to around a 0.02 cent discount before ending around 0.19 cent, a sharp contrast compared with a premium of around 0.30 cent at one stage last week.
“We suspect delivery will be small,” Nick Penney of Sucden Financial said in a market note. May white sugar on Liffe rose $6.30, or 1.2 percent, at $519.70 a tonne. In arabica coffee, dealers said another bumper harvest from Brazil expected in the coming months continued to exert downward pressure on prices, despite a coffee growers’ strike in Colombia and a fungus outbreak in Central America.
“There’s still a lot of arabica around, Brazil is still sitting on a lot,” said a London-based broker. ICE May arabica coffee inched down 0.25 cent, or 0.2 percent, to settle at $1.4320 per lb. Robusta prices were little changed as the market continued to be underpinned by the current slow pace of Vietnamese sales. May robustas on Liffe closed up $10, or 0.5 percent, at $2,108 a tonne. May cocoa on Liffe turned higher to close up 3 pounds, or 0.2 percent, to settle at 1,429 pounds a tonne. May cocoa futures on ICE finished up $4, or 0.2 percent, at $2,135 per tonne.