Front-Month Raw Sugar Ends at Near 6-Week High; Arabica Gains

  NEW YORK  -  Raw-sugar futures rose to a near six-week high settlement on Monday

as rains in No. 1 grower Brazil slowed the country's sugar-cane harvest.

  Rains delay the crop because heavy harvesting and transporting equipment

can't enter the sugar-cane fields when they are soggy.

  "So far, there is not much damage (to the harvest), but there are more rains

coming in," which could stop work again, said Alex Oliveira, a senior analyst

at brokerage Newedge in New York.

  Front-month raw sugar for October delivery on the ICE Futures U.S. exchange

ended 0.4% higher at 17.25 cents a pound, the highest close since Aug. 14. The

more actively traded contract for delivery in March ended 0.1% higher at 17.76

cents a pound, the highest settlement for that contract since June 27.

  However, action in the market has been quiet, and with a record global

surplus forecast for this season, traders don't expect a big rally anytime

soon.

  "We have more adrenaline now watching Bambi than following this market," said

Arnaldo Luiz Correa, director at Archer Consulting, in a note.

  ICE arabica coffee for delivery in December gained 2.1% to settle at $1.1705

a pound, a one-week high, as that market got a boost from traders closing bets

that prices would fall. Futures ended last week at a more than four-year low on

expectations for massive supplies.

  Brazilian growers are expected to harvest 47.5 million 60-kilogram

(132-pound) bags of coffee this year, a record for an "off-year" harvest,

government crop agency Conab said earlier this month.

  But with arabica prices down 38% from a year ago, some traders are wagering

that the market has hit bottom.

  "We are starting to see a little buying," said Joe Ricupero, vice president

at brokerage RJO Futures in New York. "But people are going to wait for a

breakout before they really put on positions."

  Cocoa for December delivery ticked 0.1% higher to $2,610 a ton as stockpiles

in the ICE-certified warehouse dwindled to the lowest level in nearly seven

months. Orange juice for delivery in November ended up 0.6% at $1.2630 a pound,

while cotton for December delivery eased 0.3% to 84.27 cents a pound in thin

trade.

  However, action in the market has been quiet, and with a record global

surplus forecast for this season, traders don't expect a big rally anytime

soon.

  "We have more adrenaline now watching Bambi than following this market," said

Arnaldo Luiz Correa, director at Archer Consulting, in a note.

  ICE arabica coffee for delivery in December gained 2.1% to settle at $1.1705

a pound, a one-week high, as that market got a boost from traders closing bets

that prices would fall. Futures ended last week at a more than four-year low on

expectations for massive supplies.

  Brazilian growers are expected to harvest 47.5 million 60-kilogram

(132-pound) bags of coffee this year, a record for an "off-year" harvest,

government crop agency Conab said earlier this month.

  But with arabica prices down 38% from a year ago, some traders are wagering

that the market has hit bottom.

  "We are starting to see a little buying," said Joe Ricupero, vice president

at brokerage RJO Futures in New York. "But people are going to wait for a

breakout before they really put on positions."

  Cocoa for December delivery ticked 0.1% higher to $2,610 a ton as stockpiles

in the ICE-certified warehouse dwindled to the lowest level in nearly seven

months. Orange juice for delivery in November ended up 0.6% at $1.2630 a pound,

while cotton for December delivery eased 0.3% to 84.27 cents a pound in thin

trade.

Cocoa Edges Higher As Market Eyes Weather, Demand

Neena Rai

  Cocoa futures rose slightly in early European trading Monday, with dealers

watching the weather in top-producing West Africa while keeping in mind a

recent surge in demand for the chocolate-making ingredient.

  At 0950 GMT, Liffe cocoa futures for December delivery traded 0.3% higher at

GBP1,706 a metric ton. Last Tuesday, futures hit a one-year high of GBP1,729 a

ton.

  Matt Bradbard, vice president of Managed Futures and Alternatives at RCM

Asset Management, expects this won't last.

  "Extreme dry weather in West Africa, a key growing area, and

higher-than-expected demand for chocolate has lifted cocoa to one-year highs

but the likelihood of further advances are decreasing."

  He expects a setback in the near future and for the market to improve toward

the end of the year.

  West Africa produces 70% of the world's crop.

  Robusta coffee futures slipped as weak New York arabica prices and

expectations of a large crop out of top producer Vietnam weighed on the market.

November robusta coffee futures traded 0.3% lower at $1,672 a ton.

  "Global coffee prices continue to fall in light of excess capacity and

sliding currencies while the demand struggles to recover," said Rao Achutuni,

president of agricultural research firm EGSI consulting.

  He said slow economic growth in the European Union sapped demand and led to

huge surpluses. The 28-nation bloc consumes more than a third of the world's

agricultural commodities.

  In other commodities, December London sugar futures slipped 0.6% to $483.50 a

ton as technical charts signal further consolidation could lie ahead this week.

November European wheat futures fell 0.15 to EUR185.50 a ton.

  "The European markets are under the pressure of a strong euro. Wheat and corn

markets are quoting to a month low level, the bullish movement observed in

August seems to be forgotten," risk manager Agritel said.

  "European operators are monitoring the crop development in the Black Sea

area, where the rains are hampering the harvests. Corn imports in Europe are

expected to be high, with prices which remain attractive and weighing on French

prices," it added.

Huge hedge fund wheat bets 'limit price downside'

23rd Sept 2013

The extent of hedge funds' negative positioning on wheat has got so large that it may limit their appetite for more, brokers warned, even as prices outperformed those of fellow grains.

Managed money, a proxy for speculators, reduced its net long position in futures and options in the main 13 US-traded agricultural commodities by nearly 29,000 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.

The reduction came despite a continued and dramatic rebuilding by hedge funds of a net long position in raw sugar futures and options, and an increase in their record bets on rising lean hog prices.

However, in grains, hedge funds extended positioning for falling prices to levels which – in Chicago wheat – approached historic highs, ringing alarm bells over the potential for further short bets.

Record harvest

Indeed, hedge funds raised their net short – the level to which short bets, which profit when values fall, exceed long holdings, which benefit when prices rise – to 50,882 contracts, a level beaten only twice on records going back to 2006.

The positioning came in the week following a US Department of Agriculture upgrade, in its monthly Wasde crop report, by 3.5m tonnes, to a record 708.9m tonnes, in its forecast for world wheat production in 2013-14, with the forecast for end-season inventories raised by 3.3m tonnes to 176.3m tonnes.

Higher supplies, in meaning less need for buyers to compete, signal lower prices.

Furthermore, hedge funds continued to nudge higher their net long on soybeans, for which the Wasde was deemed more positive for prices, cutting US yield and end-stocks estimates.

Long bets in soybeans are often balanced against short positions in grains.

'Take some courage'

However, wheat markets have proved relatively resilient in recent sessions, against a backdrop of concerns about the quality of Black Sea harvests, with late rains seen as threatening a reduction in milling specifications, while the Argentine crop is taxed by dry weather.

Furthermore, demand for US wheat has proved strong at recent prices, with latest weekly data showing the US making export sales of more than 700,000 tones and actual shipments of 1.2m tonnes, the biggest in 23 years.

Establishing new short positions in Chicago wheat "would take some courage", Brian Henry at broker Benson Quinn Commodities said.

Commerzbank said: "The lion's share of the bearish news should be priced in, which should limit any further downside potential for wheat prices."

Wheat v corn

However, one other technical extreme that is grabbing investors' attention is the relative price of the grain to corn, with wheat's premium returning close to the $2-a-bushel a level which sparked selling early last month.

Wheat for December stood at $6.47 ¾ a bushel at 06:30 Chicago time (12:30 UK time), when December corn stood at $4.49 ¼ a bushel.

Sentiment in corn has been dented by stronger-than-expected yields from the US harvest.

Hedge funds in the week to last Tuesday raised their net short by nearly 40,000 contracts to a historically high 104,211 lots.

Cocoa concerns

Among soft commodities, hedge funds increased their net long position in cocoa to a record high 67,946 contracts.

Concerns over weather in the key West African producing region, at a time of reviving demand, have continued to spur bullish comment on the bean from the likes of Macquarie and Marex Spectron.

And speculators hiked their net long position in raw sugar too, by 25,795 contracts, taking to more than 75,000 lots in two weeks their bullish swing in net positioning on the sweetener.

Prices have been boosted by ideas that demand has been stronger than thought, while wet weather has slowed the cane harvest in Brazil's key Centre South, with further price gains made since Tuesday after the Federal Reserve's surprise move to stick with emergency economic support weakened the dollar, including against Brazil's real.

Hog bets

Hedge funds extended their record net long in Chicago lean hog futures and options too, as a drop in hog slaughter raised concerns about a shortage of supplies which could support prices.

Total hog slaughter in federally Inspected facilities for the week ending September 13 was, at 2.172m head, down 10.5% compared to a year before.