Cocoa consolidates while sugar jumps on ethanol outlook
* Strong oil prices ignite sugar rally
* Cocoa quietly consolidates after crash fireworks (
Sugar futures shot up on Wednesday due to strong oil prices which could prompt top producer Brazil to funnel more cane into ethanol and further exacerbating already tight supplies in the market.
Brent crude edged closer to 2-1/2-year highs on as Libyan leader Muammar Gaddafi vowed to resist to the end a rebellion against his regime and his top oil official warned of higher oil prices.
New York's May raw sugar contract soared 1.16 cents or 3.96 percent to trade at 30.42 cents per lb at 11:15 a.m. EST (1615 GMT). London's May white sugar futures gained $25.20 to trade at $758.60 per tonne.
Sterling Smith, senior analyst for commodity brokerage Country Hedging Inc. in Minnesota, said strong oil prices meant "more cane will be converted into ethanol and there will be less sugar for the market."
"Sugar is tight and will remain tight for the coming quarter until Brazil, the world's largest producer, begins its harvest," added Nick Penney of broker Sucden Financial.
ED&F Man said in a monthly note on the sugar market that many analysts were projecting that sugar production from the centre-south of Brazil would increase in 2011/12, compared to the 33.5 million tonnes produced in 2010/11.
"Millers are expected to divert more cane to sugar production, at the expense of ethanol, in order to take advantage of the high level of world and domestic prices."
The focus of the sugar market was also on the nomination of vessels to pick up around 965,000 tonnes of Brazilian, Thai and Central American sugar to be delivered to U.S.-based trade house Cargill against the expired March raw sugar contract.
"The pace of nominations will be keenly monitored," said James Kirkup, head of sugar brokerage at ABN AMRO (Markets) UK Ltd.
COFFEE SLIPS COCOA CONSOIDATES
Coffee futures skipped lower after an early runup petered out while cocoa, which saw prices crash over 11 percent in the previous session, appeared to be consolidating at this time.
The cocoa market remained focused on top producer Ivory Coast where violence continued. Youth supporters of incumbent Laurent Gbagbo rampaged through the business district of Abidjan on Tuesday, pillaging shops owned by foreigners.
"If there's a civil war then the (cocoa) price could go very much higher," said Gary Mead, an analyst at VM Group.
The International Cocoa Organization (ICCO) forecast earlier this week that the global cocoa market will swing to surplus in 2010/11 season which ends in September due to rising production.
New York's May cocoa contract rose $8 to trade at $3,628 per tonne. Liffe's May cocoa contract shed 10 pounds to trade at 2,315 pounds per tonne.
Smith said cocoa is consolidating "after yesterday's fiasco" when the exchange nullified several orders after the spike lower.
Coffee futures were weaker, with arabicas losing steam after an early runup.
source: http://www.forexyard.com/en/news/SOFTS-Sugar-jumps-on-ethanol-outlook-cocoa-consolidates-2011-03-02T164427Z
