Sugar up on Brazil prospects

Sugar futures rose on Tuesday, underpinned by uncertainty over top producer Brazil's crop size, while coffee futures were also higher, with upside capped by investor jitters over potential for US debt default.

ICE Cocoa was steady, supported by the weaker dollar.

ICE raw sugar futures remained below October's contract high of 31.68 cents per lb hit the previous session, supported by lower-than-expected production in Brazil.

“ICE sugar prices have edged up in early trade this morning with worsening expectations of the Brazilian crop dominating prices and sentiment that has seen front month prices hovering around five month highs,” Barclays Capital said in a daily commodities note.

October raw sugar on ICE was up 0.63 cents or 2.1 percent at 31.38 cents a lb at 13:54 SA time. Prices hit a five-month high on Monday but quickly eased back.

“We corrected a little yesterday after printing new recent highs but so far this morning there has been little follow through momentum,” Thomas Kujawa at brokerage Sucden said.

“It seems today we will be more dependent on what the macro winds bring as volumes are very thin.”

October white sugar on Liffe rose $16.00 or 2 percent to $813.40 per tonne after touching a contract high of $821.00 on Monday.

COFFEE PERKS UP

Arabica coffee futures on ICE were higher as dealers said macro economic developments were key to investor sentiment in soft commodities.

The dollar fell across the board on Tuesday after U.S. President Barack Obama gave no sign of a swift breakthrough in deadlocked talks to raise the U.S. debt ceiling, while stocks put in mixed performance with focus on earnings.

“Long commercial funds are still net short so it still gives a window for a short covering rally, but generally people don't want to trade too aggressively in here, it's all about getting out of positions rather than making new ones,” a London-based broker said.

People remain focused on the macro picture as the deepening U.S. and European debt crises weigh on investor sentiment, the broker added.

September arabica coffee on ICE rose 3.4 cents or 1.4 percent to $2.4630 per lb. The contract dipped to $2.38 on Thursday, its lowest level since January.

Dealers said recent gains in robusta coffee were driven by a technical bounce.

“It's just a case of it getting overextended and the market was due a correction,” the broker said.

September robusta coffee on Liffe traded up $30 or 1.4 percent to $2,180 per tonne.

Cocoa futures on ICE were nearly unchanged, consolidating following a sharp losses in recent sessions as ample supplies from a bumper 2010/11 West African crop weighed.

“The figures people are talking about today are very different to what people talked about six months ago, but clearly visibility wasn't the same particularly with what was going on in Ivory Coast,” a cocoa trader at an international trade house said.

The market has now priced in a 2010/11 global surplus of 350,000 to 400,000 tonnes, the trader said, adding this surplus is much bigger than was anticipated earlier in the crop.

Ivory Coast's cocoa industry ground to a halt earlier this year after a disputed presidential election led to a cocoa export ban and EU sanctions.

September cocoa on ICE rose $19 or 0.6 percent to $3,015 a tonne.

“Market players are evidently coming to recognise that supplies are ample, as also borne out by the latest figures from the Ivory Coast, which as the world's biggest producer accounts for almost 40% of global supplies,” Commerzbank said in a daily market report.

Cocoa arrivals at ports in top grower Ivory Coast reached around 1,346,000 tonnes by July 24, exporters estimated on Monday, compared with 1,083,838 tonnes in the same period of the previous season.

Liffe September cocoa futures fell 1 pounds to 1,869 pounds a tonne. - Reuters