Cocoa Climbs After Forecast of Larger Deficit; Sugar Advances

By Claudia Carpenter

March 3 (Bloomberg) -- Cocoa climbed in London after the International Cocoa Organization forecast a larger supply deficit this year. Sugar gained and coffee fell.

Cocoa supply will be 193,000 metric tons below demand in the 2008-09 season that started Sept. 1, the London-based industry group said today. The deficit was 88,000 tons a year earlier, according to the report. Prices jumped 12 percent in January, extending last year’s 71 percent surge.

“It is a positive number,” said Sudakshina Unnikrishnan, an analyst at Barclays Capital in London. “Price moves we saw early in this quarter have been based on the market’s preoccupation with the supply side.”

Cocoa for delivery in May gained as much as 31 pounds, or 1.8 percent, to 1,744 pounds ($2,454) a ton on the Liffe exchange and was at 1,741 pounds at 1:50 p.m. local time.

Brussels-based bank Fortis yesterday maintained its forecast for the cocoa supply shortfall to narrow to 45,000 tons from 120,000 tons a year earlier. The industry group forecast a 2.1 percent drop in consumption this season. The market may start to focus more on demand, Unnikrishnan said.

“Demand-side fundamentals do not look terribly positive,” she said.

White, or refined, sugar for May delivery advanced 60 cents, or 0.2 percent, to $379.80 a ton after dropping the most in two months yesterday.

Import Margins

The 5.4 percent decline yesterday “will bring back profitable import margins,” said Jonathan Kingsman, chief executive officer of Lausanne, Switzerland-based sugar broker and research company Kingsman SA. Before yesterday, world sugar had gone above domestic prices in “most markets, and it cut off demand,” Kingsman said.

Thailand, the world’s second-largest supplier of sugar, sold 44,333 tons of sugar, the first sale in seven months. Bunge Ltd., the world’s biggest oilseed processor, was the only buyer, said Surat Thadachawasakul, general manager of state-owned Thai Cane and Sugar Corp.

Iran, which imports white and raw sugar, and India, the world’s biggest consumer, need to buy more sweetener from overseas this year, Kingsman said. Some importers may hold off purchases until prices stabilize, he said.

“We have to question whether sugar consumption continues to grow if the world economy is shrinking,” Kingsman said. His firm forecasts a 1.2 percent climb in global sugar demand this year.

London-based Czarnikow Sugar Futures Ltd. last week lowered its estimate for 2009 demand growth to 1.5 percent from 2.06 percent, partly because of the “far-reaching impact” on Chinese food exports from last year’s melamine milk scandal. Infant formula contaminated with the chemical was blamed for the deaths of at least six babies last year.

Robusta coffee for May delivery extended its drop, falling $23, or 1.5 percent, to $1,498 a ton after slipping 2.4 percent yesterday.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net