Raw-Sugar Futures Head for October Loss as Coffee Climbs

(Bloomberg) -- Raw sugar fell, extending this month’s decline on persistent signs that traders are in no rush to buy supplies. Arabica coffee rallied.

The March contract dropped 1.8% on ICE Futures U.S., bringing its October loss to 5.1%. The price is still up 34% in the past year following drought and frost blows to cane-sugar crops in top exporter Brazil.

A weakening premium of March futures over May indicates that sugar buyers are still in no rush to buy for immediate delivery amid an inflationary environment for commodities and high freight costs, as well as lingering demand concerns tied to Covid restrictions. The spread plunged 48% in October, a third straight slide.  

Pressure earlier Friday came from sliding energy markets, with “natural gas selling off and taking crude with it,” said Michael McDougall, managing director at Paragon Global Markets. Weaker oil prices can erode demand for cane-based ethanol specially for Brazilian mills, which can then opt to make more sweetener. Crude has since rebounded. 

In other softs markets, cotton advanced back toward the highest in a decade reached earlier this month. The fiber is up a fifth month amid tight supplies in top shipper U.S. where the harvest is late and slowed by heavy rains. The global market is seen in a 207,000-ton deficit in the 2021-22 season, up from a September estimate of 122,000 tons, Cotlook said in an emailed report, underscoring lower U.S. production.

Arabica coffee rose 1.8%, extending this month’s rally on ebbing supplies following a plunge in output in top shipper Brazil. Stockpiles at ICE-monitored depots are down 3.5% in October, the biggest drop in a year. Global shipping bottlenecks and high freight costs are pushing consumers to use existing stockpiles with supplies from Brazil to Peru and Vietnam constrained by the logistics chaos, outweighing demand headwinds caused by surging costs and the Covid crisis.  

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