Sugar falls as Brazil fuels surplus; coffee drops; cocoa steady

May 29 (Bloomberg) -- Raw-sugar futures fell for the first time in three sessions on renewed concern that global output will exceed demand as exports expand from Brazil, the world’s biggest producer. Coffee also declined, while cocoa was steady.

Sugar exports from Brazil are more profitable than sales in the domestic market after the real weakened against the dollar in the past three months, according to Cepea, a University of Sao Paulo research group. The advance in Brazil’s harvest “should weaken prices” as slack demand in the Northern Hemisphere “prompts a global trade surplus into the third quarter,” Hussein Allidina, Morgan Stanley’s head of commodity research, said in a report.

“The real is probably putting pressure on the market,” Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview.

Raw sugar for July delivery declined 0.5 percent to settle at 19.53 cents a pound at 2 p.m. on ICE Futures U.S. in New York. The price rose 0.6 percent in the previous two sessions. The commodity has tumbled 16 percent this year.

On May 23, the Brazilian real was the weakest in three years against the dollar.

“Of all soft commodities, sugar has the most bearish fundamentals,” Smith said. The sweetener “could fall another 2 to 3 cents,” especially if gasoline prices continue to drop, encouraging growers to “produce more food stuff,” rather than ethanol, he said.

Arabica-coffee futures for July delivery fell 1.4 percent to $1.654 a pound in New York. Earlier, the price touched $1.6475, the lowest for a most-active contract since July 28, 2010.

Cocoa futures for July delivery were unchanged at $2,110 a metric ton.

In London futures trading, refined sugar, robusta coffee and cocoa slid on NYSE Liffe.

Bloomberg News

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