SOFTS-Sugar rises in corrective bounce, cocoa falls

Published: 29 Oct 2009 19:14:19 PST

* Drop in prices stirs physical demand for sugar

* Vietnam robusta producers hold out for higher prices

LONDON, Oct 29 - Sugar futures rose on Thursday as the market looked to rebound after a steep setback during the last few days while cocoa prices were lower, slipping further away from last week's 30-year peak.

Coffee prices were little changed.

"I think there should be a corrective bounce up to the 22.50 (cents a lb), maybe 23.00 area but I'm not looking for a return to the high prices," said senior sugar trader David Sadler.

March raws on ICE stood 0.28 cent higher at 22.21 cents at 1152 GMT. The contract had traded as high as 24.68 cents early last week.

Sadler said the run-up in sugar prices had been overdone.

"People overestimated what (top consumer) India could do (buy) and underestimated what (top producer) Brazil was going to do (produce)," he said.

Toby Cohen, director and head of research for Czarnikow, said wet weather in Brazil remained a significant concern.

"A big worry is that yields are being affected because the quality of the cane is not that great with the wet weather," Cohen, who attended an industry event in Brazil last week, said.

Dealers said there were also signs that the drop in prices may have stir some interest from physical buyers such as India.

"With the market coming off, there are more bits and pieces to be done (physical offtake)," Cohen of Czarnikow said.

INDIAN IMPORTS

Dealers said white sugar prices were also supported by a report that India may increase duty-free white sugar imports by a further one million tonnes to meet domestic demand and to check spiraling prices.

December white sugar futures in London rose $7.50 to $566.20 per tonne.

Cocoa futures were lower with the market struggling to hold key support levels.

"Both markets look to be on the verge of turning away from the recent positive trend," brokers Sucden Financial said in a daily market update.

"Confirmation of this move would be provided by a close below 2,120 and 3,300, basis December contracts, on Liffe and ICE respectively," the report said.

December cocoa on ICE stood $35 lower at $3,293 a tonne while December cocoa in London was off 27 pounds at 2,126 pounds a tonne.

Some other dealers, however, said the scope for further losses may be limited with fundamentals still bullish.

BNP Paribas Fortis on Thursday maintained its forecast for a global cocoa deficit of 56,000 tonnes in 2009/10, the fourth consecutive season of shortfall.

The investment bank said in a monthly report that a recovery in grindings is underway.

"Signs of a stronger rebound, and one that is more solidly based on improving consumer sentiment, will probably only begin to emerge at the end of the year," BNP Paribas Fortis said.

Coffee prices were mixed with London robustas edging up and arabicas on ICE slightly lower.

Dealers said the robusta market was supported by a lack of origin sales with Vietnamese producers content to sit back and wait for prices to climb to around the $1,500 level.

January robustas rose $9 to $1,447 a tonne while December arabicas eased 0.40 cent to $1.3420 per lb.