Sugar prices steady in London after rising to 6 week highs, coffee dips

Sugar prices steady in London after rising to 6 week highs, coffee dips

	Published : Fri, 20 Jul 2007 13:17 By : Agencies Print this Story

LONDON (Thomson Financial) - Sugar prices steadied in London, after rallying yesterday to six-week highs, as players waited to see where New York prices will head today before taking positions.

Yesterday, a rally in New York raws drove London to its highest point since early June, as traders this side of the Atlantic covered their short positions or bets on price falls.

However, prices came off highs by the day end, as New York relinquished gains on late producer selling and as London followed course with some profit taking setting in.

'It was starting to get overbought yesterday so I think we saw an element of... profit taking. Today its quiet, not too much going on, we are all waiting to see what New York's going to do,' said a trader.

New York raws have been underpinned this week by a surge higher in crude oil prices, which have sparked speculation demand for sugar-based ethanol might increase going forward.

At 12.39 pm, on the Euronext Liffe, sugar for October delivery edged up to to 318.10 usd a tonne against 316.40 usd at the close yesterday, when it hit a six-week high of 319 usd a tonne.

Analysts say the recent recovery in sugar prices, which have come under extreme pressure this year from a huge market surplus, is partly down to strength in other commodities and a weak dollar.

Also, there is a perception creeping into the market that sugar might have become too cheap given higher energy demand, increased production costs and growing consumption.

On the other hand, however, supply side expectations are still pressuring prices, with players betting the upcoming harvest will again be vast and will do little to dent the market surplus.

Coffee for September delivery dipped to 1,876 usd a tonne against 1,879 usd at the close yesterday, as the recovery from last week's sell off ran out of steam amid a somewhat uncertain near term price outlook.

'The market is looking as if it wants to push higher but we are going to run into producer selling' at these levels, said a trader.

Robusta prices rose to a nine-year intra-day high of 1,945 usd on June 22 amid strong demand and expectations supplies will be tight ahead of the upcoming Vietnam harvest.

However, the bean was sold off quiet strongly towards the end of last week, before staging a modest recovery this week.

'There's clearly a perception in the market that there is a supply problem -- part of the reason we are as high as we are. Some people support that idea but others say there's plenty of coffee nearby. The Vietnam crop is expected to be big,' said a trader.

Vietnam is the world's largest producer of the Robusta coffee bean traded in London.

Elsewhere, cocoa for September delivery edged up to 1,113 usd a tonne against 1,113 usd.

maytaal.angel@thomson.com

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