SOFTS-Sugar consolidates, London cocoa hits 5-month high

Published: 25 Aug 2009 04:22:50 PST

* Top consumer India has 2-months of sugar stocks

* Weak sterling boosts London cocoa to 1,912 pounds a tonne

LONDON, Aug 25 - Sugar futures edged up Tuesday and were seen to be consolidating in a market supported by expected demand in top consumer India and tight global supplies, traders said.

London cocoa futures hit five-month highs, boosted by the weak pound, making sterling-denominated futures better value for in terms of other currencies, while coffee futures rose on investor buying, dealers said.

Sugar has been trading in a range since whites hit record highs and raws touched 28-1/2 year peaks in mid-August, supported by tight supplies in top growers Brazil and India and resilient global demand.

"I'd suggest a break below 21.30 (cents per lb) may see some momentum-type sellers and a break of 23.30 (cents per lb) you could get the spec buying starting to come into the market," a London-based trader said.

The trader said he's still very bullish.

"We think the market's far from seeing highs just yet, if anything our balance sheets are getting tighter and tighter."

The trader pointed to expected yields in Brazil declining, the Indian crop edging lower and other countries drawing down stocks.

"This market at the moment is different than any other situation in sugar in the last 30 years," he said. "This time there is no production response that can happen quickly.

"This deficit is going to be long and protracted. The next real buying is going to come from people, countries and users that have run down their stocks and they're going to be forced to come to the market and pay whatever the price is," he said.

ICE October raw sugar futures rose 0.33 cent to 22.12 cents a lb at 1157 GMT. Liffe front-month white sugar futures were up $4.00 at $554.00 per tonne.

India's sugar stocks have dipped to 4.5 million tonnes, just about enough to meet domestic demand for two months, the Hindustan Times reported on its website on Tuesday.

The Indian Sugar Mills Association (ISMA) opposes the government's move to restrict the amount of stocks that a bulk buyer can keep, the head of the trade body said on Tuesday.

LONDON COCOA HITS PEAK

Cocoa futures rose on currency, with Liffe December cocoa hitting a five-month high of 1,912 pounds per tonne earlier and ICE December cocoa hovering below resistance at $3,000 a tonne.

"It's very much London which is driving prices," a trader said. "The weak sterling has been pushing fresh highs."

"Volatility in the cocoa market has been greater than average lately and we would not discount a sharp move up or down at this stage," he said.

ICE December cocoa was up $37 at $2,963 a tonne. Liffe December cocoa rose 22 pounds to 1,894 pounds a tonne.

The International Cocoa Organization on Tuesday cut its estimate for the global cocoa deficit in 2008/09 to 73,000 tonnes from a previous forecast of 84,000 tonnes.

"Consensus in the market is that we have an equilibrium for 2008/09," the trader noted.

Switzerland's Lindt & Spruengli sees weak demand for its chocolates this year after its first-half sales slipped 5.4 percent, missing expectations and pushing its shares lower.

Coffee futures rose on investor buying, a trader said.

Robustas have been generally falling since Aug. 4.

"It's been a pretty vicious sell off for a while, so it probably is time for it to bounce back up," the trader said.

Liffe November robusta coffee futures were up $17 at $1,358 a tonne, while ICE December arabicas rose 0.80 cent to $1.2330 a lb.