Raw Sugar, Arabica Coffee Slump in Profit Taking

 

  NEW YORK - Raw-sugar and arabica-coffee futures retreated Tuesday morning, as

traders took profits from the market after a stronger real boosted prices

during the previous session.

  A stronger currency in Brazil, the No. 1 sugar and coffee grower, discourages

exports of the commodities because producers receive less reais back for their

crops sold abroad in U.S. dollars.

  Raw sugar for delivery in March ended at a nine-month high Monday, but was

recently down 1.7% at 18.71 cents a pound, below the key technical and

psychological level of 19 cents a pound.

  "The market is over-bought," said Michael McDougall, senior vice president at

brokerage Newedge in New York. But despite expectations for a massive

sugar-cane harvest in Brazil, Mr. McDougall sees room to the upside for sugar,

noting a trading range of 18 cents to 19.5 cents a pound.

  "More rain has begun to fall in the Southern producing areas and should reach

more of the center south over the next few days," Mr. McDougall said. The

center-south region produces about 90% of Brazil's sugar cane.

  "The rain could last for a week, which then would hinder the [harvest during]

the second half of October," Mr. McDougall added. "That pushes the crop further

into the tail end of the year which increases the chance of more rain induced

delays."

  He expects the final sugar production in Brazil to fall short of output

during the previous season.

  Arabica coffee for delivery in December also slid Tuesday morning, and was

recently 1.1% lower at $1.1575 a pound.

  "Fundamentally the market's still bearish," said Andre Santos, a trader at

Ally Brazilian Coffee Merchants in Plantation, Fla., citing big supplies. "We

could see the market reaching the $1.10 level sooner than later."

  Global supplies of coffee beans have swelled thanks to back-to-back bumper

crops from Brazil, the source of one-third of the world's coffee, and

recovering production from No. 2 producer Colombia.