Raw sugar surges to 30-yr high on cyclone

Raw sugar futures shot up to close at the highest level in more than three decades on Wednesday, as a massive cyclone hit Australia, one of world's top sugar exporters, deepening concerns about tight global supplies.

Cyclone Yasi may have destroyed half the sugar cane crop in Australia's key sugar cane growing districts in Queensland, representing about 15% of the country's crop, a key industry body said on Thursday. "While it is too early to assess the full damage bill, initial indications show that damage could be in the order of 50% of the productive potential of the region," said Steve Greenwood, chief executive of Queensland's Canegrowers organisation. He was referring to the Innisfail, Tully and Ingham areas were about 30% Australia's sugar cane is grown. This sparked fund and speculative buying in the market. Sterling Smith, senior analyst at brokerage Country Hedging Inc. in St. Paul, Minnesota, said the cyclone in Australia was exacerbating a sugar market already driven higher by uncertainty over sugar exports from India and how much sweetener Brazil will divert into ethanol production. "That means (with all these factors) supplies will be extremely tight," Smith said. "We're creating a perfect storm of bullishness." ICE March raw sugar soared 1.35 cents or 4% to close at 35.31 cents per lb, the strongest settlement for the spot contract since November 1980, after hitting a session peak at 36.08 cents a lb. Volume was more than double the 30-day average. London March white sugar settled up USD 25.30 at USD 844.50 a tonne after soaring to a record high of USD 857 a tonne. The tightness in supply is being reflected in the expanding spread, or difference, between the spot March and second position May raw sugar contracts on ICE Futures US. The March contract closed at a 2.55-cent premium to May, from 2.45 cents Tuesday. Prompt sugar has traded at a growing premium since July 2010, having been at a discount to the second month for most of the time since mid-2003. Cocoa futures firmed as dealers continued to weigh the impact Ivory Coast's month-long cocoa export ban could have on global supplies while the political crisis there continued. Cocoa futures on ICE rose to just below a one-year peak, buoyed by the risk premium associated with turmoil in top grower Ivory Coast. While arabica coffee nudged up to close at a 13-1/2 year high in thin dealings on some concern about truckers' plans to strike in top washed-arabica producer Colombia. ICE benchmark March cocoa rose USD 39 to settle at USD 3,352 per tonne, below last week's one-year peak of USD 3,420 per tonne. London May cocoa rose 26 pounds to settle at 2,173 pounds a tonne, below a recent six-month peak of 2,269 pounds a tonne. "Nobody's going to rush away from cocoa right now in case it all goes badly wrong," said Gary Mead, analyst with VM Group in London. "But nobody's going to put more money on the table, because the fundamentals are all right. It's all about political risk." Open interest in ICE cocoa futures climbed to a near-three-year high for the second straight day on February 1 as the Ivorian export ban encouraged new longs. Coffee sets new highs Coffee prices were firm with arabica coffee climbing to a fresh 13-1/2 year high in thin dealings lifted by the expectation for a trucker strike in Colombia. Robusta touched its highest in 2-1/4 years. Colombian truckers said they planned to go on strike early on Thursday to protest a move by the government to eliminate minimum freight rates, threatening to slow coffee shipments from the world's number 3 exporter. "They're pretty much delivering hand to mouth. If they shut down the trucking, it will come to a halt," said Bill Raffety, senior analyst for Penson Futures. Colombia, the world's top producer of high quality beans, has had two consecutive lower-than-normal crops, creating a tight supply situation for washed arabicas. ICE March arabicas closed up 1 cent at USD 2.5040 per lb, the strongest settlement for the spot contract since June 1997. May robusta coffee on Liffe closed down USD 6 at USD 2,252 a tonne, after hitting its highest since Aug. 2008 at USD 2,276.