Cotton, Raw-Sugar Futures Sink on Expectations of Ample Supplies

Leslie Josephs

  NEW YORK-Cotton and sugar prices eased Tuesday after new figures showed ample supplies of both

commodities.

  Cotton for delivery in December on the ICE Futures U.S. exchange fell 1.6% to 63.37 cents a pound,

after the U.S. Department of Agriculture raised its forecast for the U.S. crop this year by 6% from

its previous estimate.

  In its monthly supply-and-demand report, the USDA said U.S. growers would likely reap a 17.5

million-bale crop this season, which would be the largest crop in four years.

  "The U.S. number is bearish, you can't get around that," said Sharon Johnson, a senior cotton

specialist and introducing broker at KCG Futures in Atlanta.

  Growers increased production as prices hit a more than two-year high this spring. Futures prices

have fallen by a third since peaking at 94.75 cents a pound in May.

  Raw sugar for October delivery fell 1.2% to 16.05 cents a pound, tying with the nearly six-month

low that the contract reached Thursday.

  Prices fell even after industry figures showed a slowdown in sugar-cane processing in top producer

Brazil last month.

  Mills in the center-south region, where 90% of Brazil's crop is grown, crushed nearly 36 million

metric tons of cane in the period, down 19% from a year earlier. Sugar output dropped 12% to 2.2

million tons in the second half of July from a year earlier, industry group Unica said. Ethanol

production fell 16% to 1.6 billion liters. "This decline is due to the rains that occurred in part

of the sugar-cane-producing region and the lower crushing rate at various mills due to the prospect

of reduced supply of raw material," said Antonio de Padua Rodrigues, Unica's technical director.

  Mills are concerned that a drought earlier this year hurt the development of the crop and is

expected to dent the size of this year's crop. Thus far, however, mills have processed more cane

than last year, with center-south mills crushing 280.4 million tons of cane, up 3.8%, and producing

15.1 million tons of sugar, up 8.8% from a year ago, according to Unica data, as they rushed to

process all the cane they could. But analysts say the harvest could come to an abrupt end due to the

effects of the drought.

In addition, there isn't a home for Brazil's sugar, analysts say.

  "Offtake is still very slow," said Newedge analyst Phil Pia. The sugar is adding to global

supplies, he said. The International Sugar Organization expects global production to outpace demand

at the season's end in September for a fourth consecutive year. In other markets, cocoa futures hit

a new more-than-three-year high, with December cocoa gaining 0.5% to end at $3,238 a ton, the

highest active-month settlement since May 3, 2011.

  Arabica coffee for September delivery fell 2.4% to end at $1.8460 a pound, giving up more than

half of the previous session's gains, while the September contract for orange-juice concentrate was

nearly flat at $1.4390 a pound.