Future Sugar Commodity Prices Gain as Rebounding Demand

Future sugar commodity prices gained in New York as demand rebounds on speculation that yesterday?s slump, the biggest in a month, was overdone given robust demand and tight global supplies.

Sugar tumbled 9.3 percent yesterday as automatic sales by computer programs exaggerated a slide that started after concerns eased that Cyclone Yasi would damage crops in Australia. Before today, prices more than doubled since the end of May as adverse global weather slashed crops.

?We have strong demand, production losses and low supplies,? said Fain Shaffer, the president of Infinity Trading Corp., a commodities brokerage in Medford, Oregon. ?We still have to wait and see what the damage was in Australia.?

Raw sugar for March delivery rose 0.6 cent, or 1.9 percent, to 32.64 cents a pound at 11:13 a.m. on ICE Futures U.S. in New York.

Sugarcane plantations may lose 50 percent of production potential after Yasi hit a region that accounts for a third of national output, according to a growers group. Australia is the third-largest exporter.

In London, refined-sugar futures for March delivery dropped $19.80, or 2.4 percent, to $794.40 a metric ton on NYSE Liffe.

Cocoa futures for March delivery declined $81, or 2.4 percent, to $3,282 a ton on ICE, heading for the biggest drop since Jan. 5.

In London, cocoa futures for March delivery fell 40 pounds, or 1.8 percent, to 2,151 pounds ($3,451) a ton on NYSE Liffe.

Arabica-coffee futures for March delivery fell 1.7 cents, or 0.7 percent, to $2.4965 a pound on ICE. In London, robusta- coffee futures for March delivery slid $22, or 1 percent, to $2,217 a ton on NYSE Liffe.

In Australia, Sugarcane plantations in the north of Australia?s Queensland state may lose 50 percent of production potential after Tropical Cyclone Yasi scythed through an area accounting for a third of output, according to a growers? group.

Farmers will begin assessing damage to the crop today, Brisbane-based Canegrowers said today in an e-mailed statement. Losses in the world?s third-largest exporter could be at least A$500 million ($507 million), it said.

Sugar rallied to a 30-year high in New York on Feb. 2 amid concern Cyclone Yasi would cut output in Australia, before slumping 9.3 percent yesterday. The 2011 crop is likely to be ?significantly reduced? by the storm, Queensland Sugar Ltd., the nation?s biggest exporter, said today.

?Some growers have lost 100 percent of their crop, a blow from which they may never recover,? Canegrowers said in the statement. ?The losses will translate over many years, as sugarcane is a multiple-year crop.?

Raw sugar for March delivery tumbled to 32.04 cents a pound yesterday on ICE Futures U.S. in New York, the biggest drop since Dec. 30. Prices fell as automatic sales by computer programs exaggerated a slide that started as concerns eased that Cyclone Yasi will lower production in Australia, traders said. Prices reached a 30-year high of 36.08 cents on Feb. 2 and traded at 32.55 cents at 5:06 p.m. Singapore time.

?Too Early?

?It is still too early for QSL to be able to fully assess how this event will impact on next season?s sugar volumes, but it is anticipated that the 2011 crop will be significantly reduced,? Queensland Sugar said today. ?We will be working closely with industry stakeholders over the coming months in relation to production forecasts for the 2011 season.?

The area hardest hit by the storm is one of Australia?s biggest cane-growing areas, with 30 percent of the nation?s crop grown from Ayr, south to Townsville and to Cairns in the north, Canegrowers said.

Global sugar production may exceed demand by a ?small? amount in the coming 2011-2012 season, though the ?fragile? balance will remain vulnerable to weather-related risks, C. Czarnikow Sugar Futures Ltd. said Jan. 31. The world market will remain in deficit in the current 2010-2011 season, it said.

Australia may produce 3.8 million metric tons of sugar in the 2011-2012 season, compared with 3.6 million tons a year earlier, Australia and New Zealand Banking Group Ltd. said in a report yesterday. Exports will be less than 2.5 million tons, the bank said.

Devastated Fields

Raw-sugar production in the country could drop to about 3.3 million tons. That compares with forecasts of 4.2 million to 4.3 million tons before Yasi struck and after two months of heavy rain and flooding in Queensland, Rabobank Groep NV commodity analyst Wayne Gordon said on Bloomberg Television yesterday. Commonwealth Bank of Australia yesterday forecast production of about 3.6 million tons, similar to 2010 levels.

?The full impact will not become clear until growers have had the opportunity to venture back into devastated fields, and possibly until the commencement of harvesting in late June,? Canegrowers said. ?Harvest will be made more difficult because of the debris in the field.?