Soft futures mixed, Brazil avoids frost

Soft futures were mixed on Thursday with sugar and cocoa advancing, while robusta fell and arabica extended its biggest tumble in five weeks as Brazil avoided frost damage.

On the ICE Futures U.S., arabica coffee for September delivery traded at $1.2175 a pound at 13:32 GMT, down 0.08% on the day. Prices ranged between days high at $1.2253 and low of $1.2088. The C contract settled 3.14% lower on Wednesday, the steepest fall in five weeks, marking a 0.8% decline so far this week after it surged 3.08% the preceding one.

Arabica was recently supported as weather forecasters predicted temperatures below zero in growing areas in Brazil that threatened to deal frost damage to the crop. According to data from forecaster Somar Meteorologia, frost did materialize in some parts of Parana, but the state contributed only 3.5% to Brazils total output. The weather agency reported on Tuesday that lower temperatures will leave trees undamaged in Sao Paulo and Minas Gerais, the largest arabica-producing state. Parana’s output is expected to total 1.7 million bags of coffee in the 2013-2014 season. Total output in Brazil is expected to stand at 48.6 million bags. Sao Paulo is set to produce 12.6 million bags of coffee, whereas Minas Gerais’s output will most likely equal 25.5 million.

Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a report e-mailed to Bloomberg yesterday: “The frost threat did materialize, however, it did not really produce any meaningful damage. Coffee will likely retreat back to the lows, but we are not looking for selling to be as intensive by the funds.”

Sentiment for arabica coffee however continues to be bearish as before the frost damage threat in Brazil. The C contract has fallen 16% so far this year and Mathijs Deguelle, an analyst at ABN Amro Bank, said for Bloomberg he expects prices to range around $1.20 a pound for the next quarter, with upside limited.

Meanwhile on the NYSE Liffe in London, robusta coffee for September delivery traded at $1 890 a ton at 13:31 GMT, down 0.32% on the day. Prices ranged between days high and low of $1 896 and $1 878 a ton respectively. Robusta is marking a fourth straight day of declines, extending this weeks decline to 4% after it surged 8.7% during the preceding two.

Meanwhile, raw sugar advanced on the day and traded at $0.1638 a pound at 13:27 GMT, up 1.36% on the day. Prices ranged between days high and low of $0.1645 and $0.1617 respectively. The sweetener settled 1.1% lower on Wednesday but still traded 0.5% higher on the week so far.

According to a Bloomberg survey, sugar prices will increase by as much as 13% to $0.185 by March, the end of the season in Brazil. After reaching a three-decade high in 2011, the sweetener has fallen 54% so far as growers throughout the world raised output to meet demand. This year alone, raw sugar fell 16% to $0.1643 a pound on the ICE U.S. and has become the second-worst performing commodity in the Standard & Poor’s GSCI Index of 24 raw materials.

However, due to the bearish market, many countries reduced their cane acreage in the recent past, raising concern over supply. Leonardo Bichara Rocha, a senior economist at the International Sugar Organization, said farmers in India, Russia and the European Union have reduced their acreage. The group expects the sugar surplus to narrow to 3.5 million tons next season, down from a record 10 million.

Meanwhile on the NYSE Liffe, cocoa for September delivery advanced 0.13% on the day by 13:35 GMT. Futures stood at GBP1 597 a ton, ranging between days high and low of GBP1 612 and GBP1 587. Cocoa declined 0.18% on Wednesday and has so far fallen 0.8% for the week after gaining more than 7% during the preceding two.