White Sugar Drops for Fourth Day as Funds Sell on Oversupply

By Marianne Stigset

Feb. 6 (Bloomberg) -- White sugar declined for a fourth consecutive day in London as funds liquidated their contracts on forecasts that a supply glut will extend for a third straight season. Cocoa rose and robusta coffee fell.

The global sugar market will post a 1 million metric ton surplus in the 2008-2009 season, extending two consecutive years of oversupply, Tom McNeill, director of Societe Kingsman SA in Australia, told a sugar conference in Dubai yesterday. The International Sugar Organisation expects the market to move into a shortfall in the 12 months ending in September next year.
``There's still a surplus out there,'' Peter Hoyt, a sugar trader with Sucden (U.K.) Ltd. in London, said on the phone. ``You're not finding too many homes for it.''

White sugar for March delivery fell $3.10, or 0.9 percent, to $327.10 a metric ton as of 10:12 a.m. on the Liffe exchange in London. Prices have slid 5 percent since the end of last week.
Raw sugar futures for March delivery fell 0.09 cent, or 0.8 percent, to 11.77 cents a pound on ICE Futures U.S.

``There's fund liquidation in both London and New York,'' Hoyt said. ``Speculative demand has dried up. Raw is going to head a bit lower, with the March contract going towards 11.50 cents.''
Hedge-fund managers and other large speculators decreased their net-long position in New York sugar futures in the week ended Jan. 29, according to U.S. Commodity Futures Trading Commission data.

Long Positions

Speculative long positions, or bets prices will rise, outnumbered short positions by 169,291 contracts on ICE Futures U.S., formerly known as the New York Board of Trade, the Washington-based commission said in its Commitments of Traders report on Feb. 1.

A surplus of sugar production, higher inventories and freight costs may push sugar prices lower, Jean-Pierre Jentile, head of soft commodities at Societe Generale SA, said in an interview yesterday.

``Prices could go down to around 10 cents a pound again,'' Jentile said. ``Anything above 10 cents is speculative. There's no reason for us to be at current price levels.''

Robusta coffee for delivery in March fell $22, or 1 percent, to $2,135 a ton. Prices have gained 34 percent in the past 12 months.

Cocoa climbed 7 pounds, or 0.6 percent, to 1,217 pounds ($2,383) a ton on Liffe. Cocoa has gained 17 percent this year.

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