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SOFTS-ICE sugar, coffee prices fall on excess supplies

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Published: Monday, 10 Dec 2012 | 10:18 AM ET
By: Nigel Hunt and Sarah McFarlane

* Unica to provide CS Brazil sugar update later Monday

* Rains may boost tail of Ivory Coast cocoa crop

* Arabica coffee holds above long-term uptrend line

(Adds quotes, bylines, updates prices)

LONDON, Dec 10 (Reuters) - Raw sugar and arabica coffee futures on ICE were lower on Monday, with both markets under pressure from weak fundamentals while cocoa futures also fell.

Dealers said forecasts for the size of an anticipated substantial global sugar surplus in 2012/13 had widened in recent weeks.

"We've seen the March/May spread and the May/July spread weaken over the last few sessions," said James Kirkup, director of sugar brokerage at ABN AMRO Markets, noting that the strong tail to Brazil's crop has probably boosted availability into March.

"We're starting to surpass estimates on production that some people had a month or six weeks ago. We're probably going to get well in excess of 33 million tonnes of sugar production from Brazil."

March raw sugar futures on ICE were down 0.23 cent or 1.2 percent to 18.98 cents a lb at 1450 GMT. The contract hit 18.66 cents last month, its lowest level since August 2010.

"The market is rangebound but it seems a thorough test of the lows is in the offing," Nick Penney of Sucden Financial said in a market note.

Dealers were awaiting a production update on the centre-south region of Brazil, which was expected to be issued later on Monday by industry association Unica.

Dealers said the cane crush for the last half of November may fall to between 22 million and 24 million tonnes, down from 26.5 million in the first two weeks of the month.

Speculators trimmed their net short position in raw sugar contracts on ICE Futures U.S. in the week to Dec. 4, U.S. Commodity Futures Trading Commission data showed on Friday.

March white sugar on Liffe fell $4.80 or 0.9 percent to $510.70 per tonne.

Cocoa futures on Liffe were lower with the flow of cocoa from West Africa picking up after a slow start linked to dry weather, which delayed early crop growth.

Cocoa arrivals at ports in top grower Ivory Coast reached around 425,000 tonnes by Dec. 9 since the start of the season in October, exporters estimated on Monday, compared with 509,852 tonnes in the same period of the previous season.

"We've had some reasonably good rains in November which, if it carries on in December, might bode well for a good tail," one London broker said.

GHANA ELECTION

Dealers were also keeping a close watch on the aftermath of a presidential election in number two cocoa producer Ghana.

Electoral authorities said on Sunday incumbent leader John Dramani Mahama won a new term as president in the West African state in an election the opposition said was marred by tampering.

"It all looks relatively calm so I don't think there are going to be any problems," one dealer said.

March cocoa on Liffe fell 19 pounds or 1.2 percent to 1,527 pounds a tonne while March cocoa on ICE dipped $20 or 0.8 percent to $2,392 a tonne.

Dealers said the premium for the December contract on Liffe <LCC-1=R> was holding between around 70 to 75 pounds after rising sharply last week.

The open interest on the December contract, which expires on Wednesday, fell 4,999 lots to 12,535 lots, as of Friday.

Arabica coffee futures on ICE were lower with the market slipping back after Friday's short covering rally which was largely driven by technical influences.

"The technical picture on coffee is extremely bullish," Shawn Hackett of Hackett Financial Advisors said in a note, adding prices had come down to a long-term bull uptrend line that has held for over a decade.

March arabica coffee futures were down 2.45 cents or 1.6 percent at $1.5140 per lb. The contract gained 2.90 cents or 1.9 percent on Friday.

Dealers said the market continued to be weighed by surplus supplies following this year's large harvest in Brazil.

March robusta coffee futures were down $12 or 0.6 percent at $1,892 a tonne.

(Reporting by Nigel Hunt; editing by Jason Neely)

 Print
*Rains may boost tail of Ivory Coast cocoa crop. "We've seen the March/May spread and the May/July spread weaken over the last few sessions," said James Kirkup, director of sugar brokerage at ABN AMRO Markets, noting that the strong tail to Brazil's crop has probably boosted availability into March.

   
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