SOFTS-Sugar, coffee perkier as U.S. GDP brightens mood

Published: 29 Oct 2009 19:31:05 PST

* Sugar rebounds strongly, consumer interest up

* Coffee runs up with complex, cocoa mixed (Recasts, updates prices, market activity to New York close; adds second byline, dateline, previously LONDON)

NEW YORK/LONDON, Oct 29 - Most soft commodity futures vaulted higher on Thursday as third-quarter data showed the U.S. economy grew faster than expected, soothing jangled nerves among investors after the worst recession in 70 years.

A rise in world stock markets and a weaker dollar spurred a broad commodities rebound after the U.S. Commerce Department said the economy expanded from July to September at a 3.5 percent annual rate, exceeding forecasts for a 3.3 percent rate and snapping four down quarters.

"All commodities are rallying. In U.S. dollar terms, the Fed is pumping out cash giving the banks billions to speculate with," said Lars Steffensen, managing director of UK-based commodities fund Ebullion Capital Management.

"I think this is a recovery (rally)," said Alex Oliveira, senior sugar analyst for Newedge USA in New York.

New York's March raw sugar contract climbed 0.87 cent, up nearly 4.0 percent on the day, to finish at 22.85 cents per lb, having recovered from a fall to a three-week low in the previous session.

London's December white sugar contract increased $17.90 to end at $576.60 per tonne.

London-based sugar dealer David Sadler said sugar could go up to 23 cents and run into resistance at 23.40 to 23.50 cents. "But I'm not looking for a return to the high prices."

He added: "People overestimated what (top consumer) India could do (buy) and underestimated what (leading producer) Brazil was going to do (produce)."

Other analysts saw fundamental factors that could extend the sugar rally.

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," he said.

Fund managers have said world sugar prices could rise further as a poor cane harvest depleted stocks, demand climbs and top producer Brazil churns out more cane-based ethanol at the expense of sugar.

Oliveira said consumer interest has picked up after sugar prices tumbled.

This was underscored by news that Indian buyers were poised to sign deals for imports of up to 2.0 million tonnes of raw sugar for March delivery.

Analysts also see a supply crunch looming in the first quarter of 2010 when more countries will look to book orders of sugar. Oliveira said sugar will tend to "explore the upside more than the downside."

COCOA MIXED WHILE COFFEE GAINS

Cocoa futures were mixed. New York posted gains in line with the rest of the commodity sector while London eased on currency factors.

Some analysts said the scope for further losses in cocoa may be limited by the market's bullish fundamentals.

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

The bank said in a monthly report that a recovery in grindings, used as an indicator of demand, 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.

London's March cocoa contract fell 4 pounds to end at 2,182 pounds per tonne. But New York's December cocoa contract rose $27 to finish at $3,355 per tonne.

Coffee futures were slightly firmer.

A lack of producer selling from Vietnam buoyed the London robusta market as Vietnamese exporters were waiting for values to rise to around the $1,500 level.

London's November robusta coffee contract rose $13 to close at $1,406 per tonne. New York's December arabica coffee contract, on the other hand, went up 2.15 cents to end at $1.3675 per lb.

"Coffee, from the fundamental side, has not changed much. We still don't see much flow of origin," said Rodrigo Costa, vice-president for Institutional Sales in Newedge USA.