March white sugar ended $11.20 higher at $743.90 a tonne. Market has resumed its uptrend after absorbing heavy sales by index funds last week linked to annual reweighting. March robusta coffee settled $3 lower at $1,373 per tonne, weighed by a firmer dollar. Market remains stuck around the middle of its current trading range.
Earlier ICE raw sugar futures rose on Tuesday with the market looking likely to challenge a 29-year peak set earlier this month, boosted by nearby supply tightness. Dealers said the market had resumed its upward trend after absorbing heavy sales from index funds last week linked to annual reweighting. Cocoa futures firmed ahead of key grindings data later this week while arabica coffee also rose, rebounding from Friday's sharp setback.
"I think the (raw sugar) market is on course to test the 30 cent level but I'm not so sure about the prospects to go much higher," said F.O. Licht analyst Stefan Uhlenbrock. "I would expect most of the bad news is already priced in," he added, referring to disappointing crops in India and Brazil. March raw sugar stood 0.41 cent or 1.5 percent higher at 28.03 cents a lb at 1603 GMT.
It peaked at 28.95 cents earlier this month, a 29-year high for the benchmark contract. Dealers noted that top consumer India is likely to need to import sugar later in the season although it appears unlikely to make further purchases in the short-term. "I think they could import more sugar towards the end of their season which runs up to September but for the time being they should be more or less done," Uhlenbrock said.
The market has also derived support from a drop in Brazilian production in 2009/10 following excessive rains but there could be a significant rebound in output in 2010/11. Uhlenbrock said the heavy rainfall had provided soil moisture which could be favourable for the 2010/11 crop while there was also still cane in the fields which could not be harvested in 2009/10.
"These two facts together could result in a bumper crop (in 2010/11)," he said. The market will be looking for confirmation that cocoa demand may be starting to recover after a recession-linked decline in early 2009. Last week's European grind showed a marginal improvement from year earlier levels. Dealers noted news that Kraft Foods had agreed a deal to buy Cadbury, creating the world's top confectioner.