Sugar Falls on Increased Thai Production, China Inflation; Coffee Declines

Sugar fell in New York and London after production in Thailand, the world’s second-largest shipper, increased and on concerns that China may take further steps to contain inflation. Coffee also retreated.

Sugar output in Thailand may climb to 9.8 million metric tons this season, according to researcher F.O. Licht. The People’s Bank of China said stabilizing prices and managing inflation expectations are “critical,” after policy makers from India and Brazil yesterday signaled further tightening is possible.

“Demand for physical sugar is slow,” Connor Noonan, an analyst at Castlestone Management Ltd. in London, said in an e- mail today. “That, combined with inflation fears in India and China, as well as a large Thai crop, will put downward pressure on the markets.”

Raw sugar for July delivery slid 0.32 cent, or 1.5 percent, to 21.73 cents a pound by 8:35 a.m. on ICE Futures U.S. in New York. White, or refined, sugar for August delivery fell $11.20, or 1.8 percent, to $598.30 a ton on NYSE Liffe in London. Earlier the price touched $596.40 a ton, the lowest since Sept. 21, 2010.

Thai sugar production had reached 9.6 million tons by the beginning of this month, up from 7.2 million tons a year earlier, F.O. Licht said in a report covering the April 25-May 2 period. Thai exports could reach an all-time high of 7 million tons this season, it said.

“The gigantic Thai crop is weighing on prices, while the slow start to top-producer Brazil’s Center South cane harvest proved unable to stop the decline and only seems to keep losses in check,” the researcher said.

Brazil’s sugar cane harvest was delayed due to rains, while ethanol production has been the favored use for cane amid soaring prices for the biofuel.

Thomas Kujawa of Sucden Financial wrote in a report today that the company expects further lower levels going forward.

Brazilian Harvest

Arabica coffee for July delivery fell 0.5 percent to $3.0465 a pound in New York. The price yesterday touched $3.089, the highest level since May 1997. Robusta coffee for July delivery retreated $26, or 1 percent, to $2,585 a ton in London.

Coffee growers in Brazil, the world’s largest producer, are accelerating the harvest to take advantage of prices, Margarete Boteon, an analyst at Cepea, a University of Sao Paulo research group, wrote in a report yesterday.

“Some small volumes of the 2011-12 season have been placed to trade,” she said.

Cocoa for July delivery gained $28, or 0.9 percent, to $3,299 a ton on ICE. Cocoa for July delivery rose 0.5 percent to 1,993 pounds ($3,296) a ton on NYSE Liffe.

(Source: http://www.bloomberg.com/news/2011-05-04/sugar-falls-for-a-fifth-day-on-thai-output-china-inflation-coffee-drops.html)